Wise AG began operations at the beginning of 2019. The following information pertains to this company 1. Pretax financial income for 2019 is €100,000. 2. The tax rate enacted for 2019 is 30% 3. Tax rate for future years is 40%. 4. Differences between the 2019 income statement and tax return are listed below: a. Warranty expense accrued for financial reporting purposes amounts to €7,000. Warranty deductions per the tax return amount to €2,000. b. Income on construction contracts using the percentage-of-completion method per books amounts to €92,000. Income on construction contracts for tax purposes amounts to €67,000. c. Depreciation of property, plant, and equipment for financial reporting purposes amounts to €60,000. Depreciation of these assets amounts to €80,000 for the tax return. d. A €3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income. e. Interest revenue recognized on an investment in tax-exempt bonds amounts to €1,500.
Wise AG began operations at the beginning of 2019. The following information pertains to this company
1. Pretax financial income for 2019 is €100,000.
2. The tax rate enacted for 2019 is 30%
3. Tax rate for future years is 40%.
4. Differences between the 2019 income statement and tax return are listed below:
a. Warranty expense accrued for financial reporting purposes amounts to €7,000. Warranty deductions per the tax return amount to €2,000.
b. Income on construction contracts using the percentage-of-completion method per books amounts to €92,000. Income on construction contracts for tax purposes amounts to €67,000.
c.
d. A €3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income.
e. Interest revenue recognized on an investment in tax-exempt bonds amounts to €1,500.
5. Taxable income is expected for the next few years.
Required:
a. Compute taxable income for 2019.
b. Compute the
c. Prepare the
d. Draft the income tax expense section of the income statement, beginning with “Income before income taxes.”
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