I. Broncos Co. reports pretax financial income of $70,000 for 20x1. The following itemscause taxable income to be different than pretax financial income:●●Depreciation on the tax return is greater than depreciation on the incomestatement by $16,000.Rent collected on the tax return is greater than rent earned on the incomestatement by $22,000.Fines for pollution appear as an expense of $11,000 on the incomestatement.Interest income from City of Phoenix municipal bonds is $5,000.Broncos' tax rate is 30% for all years and the company expects to reporttaxable income in all future years.a) Compute taxable income.b) Prepare the journal entry to record income tax expense, deferredincome tax, and income tax payable for 20x1.c) Compute net income for 20x1. II. Pension data for the Phoenix Company include the following for the current calendaryear:Discount rate, 8%Expected return on plan assets, 10%Actual return on plan assets, 9%Service cost, $200,000January 1:PBOABOPlan assetsAmortization of prior service costAmortization of net gainDecember 31:Cash contributions to pension fundBenefit payments to retirees$1,400,0001,000,0001,500,00020,0004,000$220,000240,000a) Determine pension expense for the year.b) Prepare the journal entries to record pension expenses and funding forthe year.

Answered: I. Broncos Co. reports pretax financial…

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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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.
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.

II. Pension data for the Phoenix Company include the following for the current calendar
year:
Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, $200,000
January 1:
PBO
ABO
Plan assets
Amortization of prior service cost
Amortization of net gain
December 31:
Cash contributions to pension fund
Benefit payments to retirees
$1,400,000
1,000,000
1,500,000
20,000
4,000
$220,000
240,000
a) Determine pension expense for the year.
b) Prepare the journal entries to record pension expenses and funding for
the year.

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“Since you have asked multiple questions, we will solve the first question for you. If you want any specific question to be solved, then please specify the question number or post only that question.”

Deferred tax assets, as well as deferred tax liabilities, seem to be exact opposites of each other. A deferred tax asset seems to be a corporate tax benefit for future taxes, whereas a deferred tax liability seems to be a tax obligation that must be settled in the future.

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