Assume that Cunningham's 2025 pretax accounting income is $55,600 and that Cunningham reports $25,000 more depreciation expense for tax purposes than it shows in the accounting records, expected to reverse in 2027. Cunningham estimates that warranty costs associated with sales in 2025 will be $30,000; Cunningham incurred another $28,000 in warranty claims satisfied in 2025. Cunningham's tax-free municipal bond earned another $14,000 in 2025. A new tax law is enacted in 2025, increasing the tax rate from 21% in 2025 to 24% in 2026 and 25% in 2027 and thereafter. Prepare the journal entry necessary to record income taxes at the end of 2025. d. e. What will Cunningham report in the tax section of its 2025 income statement?

Assume that Cunningham's 2025 pretax accounting income is $55,600 and that Cunningham reports $25,000 more depreciation expense for tax purposes than it shows in the accounting records, expected to reverse in 2027. Cunningham estimates that warranty costs associated with sales in 2025 will be $30,000; Cunningham incurred another $28,000 in warranty claims satisfied in 2025. Cunningham's tax-free municipal bond earned another $14,000 in 2025. A new tax law is enacted in 2025, increasing the tax rate from 21% in 2025 to 24% in 2026 and 25% in 2027 and thereafter. Prepare the journal entry necessary to record income taxes at the end of 2025. d. e. What will Cunningham report in the tax section of its 2025 income statement?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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