Warr22e_IM_TM_Ch14 - Transparency Master 14-1 Bravara...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Transparency Master 14-1 Bravara Corporation Income Statement For the Year Ended December 31, 2004 Net Sales. ..................................... $1,200,000 Cost of merchandise sold. ......... 410,000 Gross profit. ................................. $ 790,000 Operating expenses: Salaries expense. .................... $300,000 Utilities expense. .................... 170,000 Advertising expense. .............. 60,000 Depreciation expense. ............ 43,000 Miscellaneous expense. ......... 37,000 610,000 Income before income tax. ......... $ 180,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Transparency Master 14-2 NET INCOME VS. TAXABLE INCOME The income statement for Gibson Corporation's year ended December 31, 2004, is as follows: Net Sales. ................................................................................ $500,000 Cost of merchandise sold. .................................................... 200,000 Gross profit. ............................................................................ $300,000 Operating expenses: Salaries expense. ........................................................... $75,000 Utilities expense. ............................................................ 30,000 Warranty expense. ......................................................... 10,000 Depreciation expense. ................................................... 15,000 Other expense. ............................................................... 8,000 138,000 Income before income tax. .................................................... $162,000 Gibson has the following temporary differences: 1. Straight-line depreciation is used when preparing financial statements. Accel- erated depreciation is used for tax purposes. Gibson's depreciation expense for the year under accelerated methods is $27,000. 2. The amount shown on the financial statements for warranty expense is the es- timated cost of warranty repairs that will be made on all units sold this year. However, Gibson spent only $6,000 on warranty repairs this year. Warranty ex- penses must be paid in order to deduct them when preparing a tax return. Required: 1. Calculate the amount of taxable income that will be reported on Gibson's tax return. 2. Assume that Gibson's tax rate is 40%. Calculate the income taxes that will be paid now, based on Gibson's taxable income. 3. Calculate the income taxes that Gibson would have paid if the amount shown as "Income before Income Tax" on the financial statements was the amount on which Gibson was taxed. 4. Compute the taxes that Gibson has deferred to future years. This is the differ-
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 16

Warr22e_IM_TM_Ch14 - Transparency Master 14-1 Bravara...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online