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I. 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 $16,000. Rent collected on the tax return is greater than rent earned on the income statement by $22,000. Fines for pollution appear as an expense of $11,000 on the income statement. Interest income from City of Phoenix municipal bonds is $5,000.

I. 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 $16,000. Rent collected on the tax return is greater than rent earned on the income statement by $22,000. Fines for pollution appear as an expense of $11,000 on the income statement. Interest income from City of Phoenix municipal bonds is $5,000.

FINANCIAL ACCOUNTING
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 $16,000. - Rent collected on the tax return is greater than rent earned on the income statement by $22,000. - Fines for pollution appear as an expense of $11,000 on the income statement. - Interest income from City of Phoenix municipal bonds is $5,000. Broncos’ tax rate is 30% for all years and the company expects to report taxable income in all future years. a) Compute taxable income. b) Prepare the journal entry to record income tax expense, deferred income tax, and income tax payable for 20x1. c) Compute net income for 20x1.
Transcribed Image Text: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 $16,000. - Rent collected on the tax return is greater than rent earned on the income statement by $22,000. - Fines for pollution appear as an expense of $11,000 on the income statement. - Interest income from City of Phoenix municipal bonds is $5,000. Broncos’ tax rate is 30% for all years and the company expects to report taxable income in all future years. a) Compute taxable income. b) Prepare the journal entry to record income tax expense, deferred income tax, and income tax payable for 20x1. c) Compute net income for 20x1.
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