"Example Problem On Taxes-Soln 03-05-1

"Example Problem On Taxes-Soln 03-05-1 - accounts?...

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Example Problem On Taxes Solution Income before Tax is $200,000. Tax rate is 40%. Financial Report Tax To Shareholders Return Depreciation $20,000 $35,000 Warranty expense 5,000 4,000 Installment sales revenue 30,000 8,000 Prepaid rental revenue 11,000 17,000 State and municipal bond revenue 24,000 -- Life insurance premiums 9,000 -- Dividend revenue from other US corporations 10,000 3,000 a. What is taxable income? $148,000 $200,000 is bottom of FRS column. Work up to get $159,000 then work down the TR column to get $148,000. b. What is the journal entry to record tax due for the year, tax expense and additions to deferred tax
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Unformatted text preview: accounts? Income tax expense 71,200 Deferred tax assets 2,800 Deferred tax liabilities 14,800 Tax due for the year 59,200 c. Write the amounts that will appear at the bottom of the income statement starting with Income Before Tax Income before taxes $200,000 Less: income tax expense Current $59,200 Deferred 12,000 71,200 Net income $128,800 d. Reconcile the effective tax rate with the statutory rate of 40% US Federal Statutory Rate 40.00% Municipal bond interest revenue (4.80) Life insurance premiums 1.80 Dividend revenue exclusion (1.40) Effective tax rate 35.60%...
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This note was uploaded on 04/09/2011 for the course MGMT 351 taught by Professor Staff during the Winter '08 term at Purdue.

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