Homework Quiz—14 S11 Section 2

Homework Quiz—14 S11 Section 2 - 40,000 4....

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Section 2 Spring 11 Homework Quiz —14 Name Section ABC Company’s pretax accounting income is $850,000 and its tax rate is 40%. The following items cause taxable income to be different from pretax accounting income: a. Depreciation expense on the tax return is $250,000 and is $185,000 in the calculation of pretax accounting income. b. Rent expense on the tax return is $105,000 and is $70,000 in the calculation of pretax accounting income. c. Municipal bond interest revenue in the calculation of pretax accounting income is $80,000. Municipal bond interest revenue is not taxable. Required : 1. Taxable income is: $850,000 – $65,000 - $35,000 - $80,000 = $670,000 2. Income tax payable is: 40% x $670,000 = $268,000. 3. The journal entry to record income tax expense, deferred income taxes, and income taxes payable is: Debit Credit Income tax expense 308,000 Income tax payable 268,000 Deferred tax liability
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Unformatted text preview: 40,000 4. The effective income tax rate is: $308,000/$850,000 = 36.2% 1 Section 2 Spring 11 Homework Quiz 14 Name Section ABC Companys pretax accounting income is $850,000 and its tax rate is 40%. The following items cause taxable income to be different from pretax accounting income: a. Depreciation expense on the tax return is $250,000 and is $185,000 in the calculation of pretax accounting income. b. Rent expense on the tax return is $105,000 and is $70,000 in the calculation of pretax accounting income. c. Municipal bond interest revenue in the calculation of pretax accounting income is $80,000. Municipal bond interest revenue is not taxable. Required : 1. Taxable income is: 2. Income tax payable is: 3. The journal entry to record income tax expense, deferred income taxes, and income taxes payable is: Debit Credit 4. The effective income tax rate is: 2...
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This note was uploaded on 03/03/2012 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Homework Quiz—14 S11 Section 2 - 40,000 4....

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