I. Broncos Co. reports pretax financial income of $70,000 for 20x1. The following items cause taxable income to be different than pretax financial income: ● ● ● Depreciation on the tax return is greater than depreciation on the income statement by $16,000. Rent collected on the tax return is greater than rent earned on the income statement by $22,000. Fines for pollution appear as an expense of $11,000 on the income statement. Interest income from City of Phoenix municipal bonds is $5,000. Broncos' tax rate is 30% for all years and the company expects to report taxable income in all future years. a) Compute taxable income.
I. Broncos Co. reports pretax financial income of $70,000 for 20x1. The following items cause taxable income to be different than pretax financial income: ● ● ● Depreciation on the tax return is greater than depreciation on the income statement by $16,000. Rent collected on the tax return is greater than rent earned on the income statement by $22,000. Fines for pollution appear as an expense of $11,000 on the income statement. Interest income from City of Phoenix municipal bonds is $5,000. Broncos' tax rate is 30% for all years and the company expects to report taxable income in all future years. a) Compute taxable income.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 4BCRQ
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Transcribed Image Text:I. Broncos Co. reports pretax financial income of $70,000 for 20x1. The following items
cause taxable income to be different than pretax financial income:
●
●
Depreciation on the tax return is greater than depreciation on the income
statement by $16,000.
Rent collected on the tax return is greater than rent earned on the income
statement by $22,000.
Fines for pollution appear as an expense of $11,000 on the income
statement.
Interest income from City of Phoenix municipal bonds is $5,000.
Broncos' tax rate is 30% for all years and the company expects to report
taxable income in all future years.
a) Compute taxable income.
b) Prepare the journal entry to record income tax expense, deferred
income tax, and income tax payable for 20x1.
c) Compute net income for 20x1.
Transcribed Image Text:II. Pension data for the Phoenix Company include the following for the current calendar
year:
Discount rate, 8%
Expected return on plan assets, 10%
Actual return on plan assets, 9%
Service cost, $200,000
January 1:
PBO
ABO
Plan assets
Amortization of prior service cost
Amortization of net gain
December 31:
Cash contributions to pension fund
Benefit payments to retirees
$1,400,000
1,000,000
1,500,000
20,000
4,000
$220,000
240,000
a) Determine pension expense for the year.
b) Prepare the journal entries to record pension expenses and funding for
the year.
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