For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,008,000. Selected information for 2021 from Fidelity’s records follows: Interest income on municipal governmental bonds$64,000Depreciation claimed on the 2021 tax return in excessof depreciation on the income statement 88,000Carrying amount of depreciable assets in excessof their tax basis at year-end 152,000Warranty expense reported on the income statement 42,000Actual warranty expenditures in 2021 32,000 Fidelity's income tax rate is 25%. At January 1, 2021, Fidelity's records indicated balances of zero and $16,000 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?

Journal entries refers to the official book of a firm/company which is used to record the day to day…

Answered: Required: 1. Determine the amounts…

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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Question

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,008,000. Selected information for 2021 from Fidelity’s records follows:


Interest income on municipal governmental bonds	$	64,000
Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement		88,000
Carrying amount of depreciable assets in excess of their tax basis at year-end		152,000
Warranty expense reported on the income statement		42,000
Actual warranty expenditures in 2021		32,000

Fidelity's income tax rate is 25%. At January 1, 2021, Fidelity's records indicated balances of zero and $16,000 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?

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