For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $977,000. Selected information
Question:
For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2018 from Fidelity's records follows:
Interest income on municipal bonds...........................................................$32,000
Depreciation claimed on the 2018 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 2018.........................................................16,000
Fidelity's income tax rate is 40%. At January 1, 2018, 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 2018, and prepare the appropriate journal entry.
2. What is Fidelity's 2018 net income?
Step by Step Answer:
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas