Sheridan Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:Pretax financial income$2615000Estimated litigation expense3615000Extra depreciation for taxes(5622000)Taxable income$ 608000The estimated litigation expense of $3615000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $1874000 in each of the next 3 years. The income tax rate is 20% for all years.Income taxes payable is$121600.$401400.$601400.$0.

Income taxes payable = taxable income * tax rate

Answered: Sheridan Co. at the end of 2020, its…

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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Sheridan Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income	$2615000
Estimated litigation expense	3615000
Extra depreciation for taxes	(5622000)
Taxable income	$ 608000

The estimated litigation expense of $3615000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $1874000 in each of the next 3 years. The income tax rate is 20% for all years.

Income taxes payable is

$121600.

$401400.

$601400.

$0.

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