For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,016,000. Selected information for 2021 from Fidelity's records follows: Interest income on municipal governmental bonds Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement Carrying amount of depreciable assets in excess of their tax basis at year-end Warranty expense reported on the income statement Actual warranty expenditures in 2021 $ 72,000 96,000 168,000 46,000 36,000
For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,016,000. Selected information for 2021 from Fidelity's records follows: Interest income on municipal governmental bonds Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement Carrying amount of depreciable assets in excess of their tax basis at year-end Warranty expense reported on the income statement Actual warranty expenditures in 2021 $ 72,000 96,000 168,000 46,000 36,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,016,000. Selected
information for 2021 from Fidelity's records follows:
Interest income on municipal governmental bonds
Depreciation claimed on the 2021 tax return in excess
of depreciation on the income statement
Carrying amount of depreciable assets in excess
of their
basis at year-end
Warranty expense reported on the income statement
Actual warranty expenditures in 2021
Fidelity's income tax rate is 25%. At January 1, 2021, Fidelity's records indicated balances of zero and $18,000 in its deferred tax
asset and deferred tax liability accounts, respectively.
Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is Fidelity's 2021 net income?
Complete this question by entering your answers in the tabs below.
Required 1
Calculation
Required 1 GJ Required 2
Pretax accounting income
Permanent difference
Determine the amounts necessary to record income taxes for 2021. (Enter your answers in thousands rounded to 1 decimal place.
Amounts to be deducted should be indicated with a minus sign.)
Tax Rate %
Income subject to taxation
Temporary difference
Depreciation
Taxable income (income tax return)
$ 1,016
$
1,016
$ 72,000
96,000
X
X
168,000
46,000
36,000
$ 1,016 X
=
Tax $
Recorded as:
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