Question
17. Everly Fair had $7 million of Income Before Income Tax. In addition, they had $300,000 of interest income from their investment in State of
17. Everly Fair had $7 million of Income Before Income Tax. In addition, they had $300,000 of interest income from their investment in State of South Carolina bonds. Everly Fair paid environmental fines of $600,000 of fines levied by the Environmental Protection Agency due to their failure to properly install air filtration devices by the statutory deadline. Everly Fair had future taxable amounts of $800,000 resulting from MACRS tax depreciation of fixed assets exceeding US GAAP depreciation, recorded on a straight-line basis by Everly Fair. The Company offers a 4 year warranty on al of the products which they manufacture, and have a future taxable amount of $400,000 for differences between when the warranty expense is recognized under US GAAP and when deducted, as paid, under the US Tax Code. The combined Federal & State tax rate was 40%.
Prepare the Journal Entry to record Everly Fairs Income Tax Provision (be sure to separate Income Tax Expense between Current and Deferred).
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