Problem A, Income Taxes Harms Way Company (HWC) provides youwith the following information for the year ended October 31, 2020.Your assignment is to calculate income tax expense, income taxespayable, and deferred income tax assets/liabilities. The end resultwill be a journal entry to record all of that. In addition, youmust calculate HWC’s effective tax rate and prepare areconciliation to the federal statutory rate of 21%. You canexplain the difference in words, if you wish.

Information provided:

1. Income before tax, as shown on HWC’s GAAP statement of income= $2,440,000

2. Depreciation calculated under GAAP = $300,000. Depreciationas will be shown on the tax return = $475,000.

3. Interest income on municipal bonds, which is not subject tofederal income tax = $150,000.

4. Fines recorded and paid during the year to the EPA forenvironmental violations = $450,000. Fines are not taxdeductible.

5. Meals and entertainment expenses recorded during the year =$375,000. Only one-half (50%) of those expenses may be deducted fortax purposes.

6. At the end of the fiscal year (in October 2020), HWC receiveda payment of $750,000 from a client for a product to be deliveredin November 2020. Under the tax law, that payment is taxable whenreceived, not when the product is delivered.

Your Assignment: Calculate:

1. Income tax expense (GAAP).

2. Income taxes currently payable.

3. Deferred income taxes resulting from this year’soperations.

Be sure to show your work, I give partial credit (full credit,too, of course), but I must be able to see how you calculatedamounts used in your answer