For the year ended December 31, 2016, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2016 from Fidelity’s records follows: Interest income on municipal bonds $32,000 Depreciation claimed on the 2016 tax return in excess of depreciation on the income statement 55,000 Carrying amount of depreciable assets in excess of their tax basis at year-end 85,000 Warranty expense reported on the income statement 26,000 Actual warranty expenditures in 2016 16,000 Fidelity’s income tax rate is 40%. At January 1, 2016, Fidelity’s records indicated balances of zero and $12,000 in its deferred tax asset and deferred tax liability accounts, respectively. Required: 1. Determine the amounts necessary to record income taxes for 2016 and prepare the appropriate journal entry. 2. What is Fidelity’s 2016 net income?

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 12P: Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax...
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For the year ended December 31, 2016, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2016 from Fidelity’s records follows: Interest income on municipal bonds $32,000 Depreciation claimed on the 2016 tax return in excess of depreciation on the income statement 55,000 Carrying amount of depreciable assets in excess of their tax basis at year-end 85,000 Warranty expense reported on the income statement 26,000 Actual warranty expenditures in 2016 16,000 Fidelity’s income tax rate is 40%. At January 1, 2016, Fidelity’s records indicated balances of zero and $12,000 in its deferred tax asset and deferred tax liability accounts, respectively. Required: 1. Determine the amounts necessary to record income taxes for 2016 and prepare the appropriate journal entry. 2. What is Fidelity’s 2016 net income?

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