Broncos Co. reports pretax financial income of $70,000 for 20x1. The following items cause taxable income to be different than pretax financial income:Depreciation on the tax return is greater than depreciation on the income statement by $15,000.Rent collected on the tax return is greater than rent earned on the income statement by $20,000.Interest income from Denver municipal bonds $12,000Broncos’ tax rate is 30% for all years and the company expects to report taxable income in all future years.Compute taxable income for 20x1. Show your computation. No credit if not. Prepare the journal entry to record income tax expense, deferred income tax, and income tax payable for 20x1. Compute net income for 20x1.

Deferred Tax asset/liability is created due to temporary differences arising between accounting…

Answered: Compute taxable income for 20x1. Show…

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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Broncos Co. reports pretax financial income of $70,000 for 20x1. The following items cause taxable income to be different than pretax financial income:

Depreciation on the tax return is greater than depreciation on the income statement by $15,000.
Rent collected on the tax return is greater than rent earned on the income statement by $20,000.
Interest income from Denver municipal bonds
$12,000

Broncos’ tax rate is 30% for all years and the company expects to report taxable income in all future years.

Compute taxable income for 20x1. Show your computation. No credit if not.

Prepare the journal entry to record income tax expense, deferred income tax, and income tax payable for 20x1.

Compute net income for 20x1.

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