Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic
Question:
Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $300,000, which includes interest revenue of $40,000 from municipal governmental bonds. The enacted tax rate is 25%.
Required:
Assuming no differences between accounting income and taxable income other than those described above:
1. Prepare the journal entry to record income taxes in 2021.
2. What is Southern Atlantic’s 2021 net income?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas