A company began operations in January Year 1 and purchased a vehicle for $40,000. The company plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in Year 1, 30% in Year 2, and 20% in Year 3. Pretax accounting income for Year 1 was $380,000, which includes interest revenue of $44,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table and prepare the journal entry to record income taxes in Year 1. 2. What is the company's Year 1 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation General Journal Required 2 Complete the following table to record income taxes in Year 1. Note: Amounts to be deducted should be indicated with a minus sign. Enter your answers in whole dollars. Description Pretax accounting income Amount $ 380,000 x Tax Rate Tax Recorded as: Permanent difference Income subject to taxation $ 380,000 × = Income tax expense Temporary difference × = Deferred tax liability Income taxable in current year $ 380,000 × = Income tax payable
A company began operations in January Year 1 and purchased a vehicle for $40,000. The company plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in Year 1, 30% in Year 2, and 20% in Year 3. Pretax accounting income for Year 1 was $380,000, which includes interest revenue of $44,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table and prepare the journal entry to record income taxes in Year 1. 2. What is the company's Year 1 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation General Journal Required 2 Complete the following table to record income taxes in Year 1. Note: Amounts to be deducted should be indicated with a minus sign. Enter your answers in whole dollars. Description Pretax accounting income Amount $ 380,000 x Tax Rate Tax Recorded as: Permanent difference Income subject to taxation $ 380,000 × = Income tax expense Temporary difference × = Deferred tax liability Income taxable in current year $ 380,000 × = Income tax payable
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company began operations in January Year 1 and purchased a vehicle for $40,000. The company plans to use
straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the
deduction is 50% of cost in Year 1, 30% in Year 2, and 20% in Year 3. Pretax accounting income for Year 1 was $380,000,
which includes interest revenue of $44,000 from municipal governmental bonds. The enacted tax rate is 25%.
Assuming no differences between accounting income and taxable income other than those described above:
Required:
1. Complete the following table and prepare the journal entry to record income taxes in Year 1.
2. What is the company's Year 1 net income?
Complete this question by entering your answers in the tabs below.
Required 1
Calculation
General
Journal
Required 2
Complete the following table to record income taxes in Year 1.
Note: Amounts to be deducted should be indicated with a minus sign. Enter your answers in whole dollars.
Description
Pretax accounting income
Amount
x Tax Rate
$ 380,000
Tax
Recorded as:
Permanent difference
Income subject to taxation
Temporary difference
Income taxable in current year
x
=
$ 380,000 x
=
Income tax expense
Deferred tax liability
=
Income tax payable
$ 380,000
< Required 1 Calculation
General Journal >
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