9. Assume the following facts for Moore Company in 2015: Book income before tax: $800,000. The following items were included in income: • Interest income of $80,000 was received from an investment in municipal bonds. This income is exempt for tax purposes. Rent income of $20,000 was collected in 2014 and included for tax purposes. For book purposes, it was reported as earned in 2015. The following items were deducted from income: • An asset was purchased during 2015, and depreciation for book purposes was $40,000. There was $100,000 deducted for tax purposes Warranty expense of $20.000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the amount of taxable income for tax purposes? a) $655,000 b) $625,000 c) $735,000 d) $755,000
9. Assume the following facts for Moore Company in 2015: Book income before tax: $800,000. The following items were included in income: • Interest income of $80,000 was received from an investment in municipal bonds. This income is exempt for tax purposes. Rent income of $20,000 was collected in 2014 and included for tax purposes. For book purposes, it was reported as earned in 2015. The following items were deducted from income: • An asset was purchased during 2015, and depreciation for book purposes was $40,000. There was $100,000 deducted for tax purposes Warranty expense of $20.000 was recognized for book purposes, while $5,000 was recognized for tax purposes. (Assume a one-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the amount of taxable income for tax purposes? a) $655,000 b) $625,000 c) $735,000 d) $755,000
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 47P
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Transcribed Image Text:9. Assume the following facts for Moore Company in 2015:
Book income before tax: $800,000.
The following items were included in income:
•
Interest income of $80,000 was received from an investment in
municipal bonds. This income is exempt for tax purposes.
Rent income of $20,000 was collected in 2014 and included for tax
purposes. For book purposes, it was reported as earned in 2015.
The following items were deducted from income:
•
An asset was purchased during 2015, and depreciation for book
purposes was $40,000. There was $100,000 deducted for tax purposes
Warranty expense of $20.000 was recognized for book purposes, while
$5,000 was recognized for tax purposes. (Assume a one-year warranty
contract.)
The balance of the Deferred Tax Asset account (debit) at January 1,
2015, was $8,000 as a result of the rent income temporary difference.
The tax rate for all years was 40 percent.
What is the amount of taxable income for tax purposes?
a) $655,000
b) $625,000
c) $735,000
d) $755,000
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