ACC 3250 CH 16-Comprehension check A corporation has pretax financial accounting (book) income of $146,000 in year 3. Additional information (for year 3) is as follows: 1. Municipal bond interest income is $35,000. 2. Life insurance premium expense, 3. Accelerated depreciation is used for tax purposes, while straight-line is used for books. Tax depreciation is $10,000; book depreciation is $5,000. 4. Estimated warranty expense of $500 is accrued for book purposes where the corporation is the beneficiary. per books is $4,000. Additional details that may affect amounts in Year 3- Year 5 a. On 1/1/Yl the enterprise acquired a depreciable asset for S 30,000 that had an estimated life of six years and is depreciated on a straight-line basis for book purposes. For tax purposes, the asset is depreciated using the straight-line election under MACRS and qualifies as a three-year asset. The depreciation for each year under MACRS is as follows: (Year 1 $5,000; Year 2 S10,000; Year 3 $10,000; Year 4 $5,000) b. The enterprise deducted warranty expense of $500 for book purposes in year 3 that is expected to be deductible for tax purposes in year 4. c. Taxable income was $112,000 in Year 4, and $113,500 in Year 5. d. The applicable tax rate is 40% for all years affected. Required i. Complete the following helper schedule for depreciation and warranty cost. Book depreciation Tax depreciation 5,000 5,000 5,000 10,000 Yr 3 5,000 10,000 Yr 4 5,000 5,000 Yr 5 5,000 ii. Determine taxable income for Year 3 and prepare the necessary income tax related journal entry (entries) DTL Pretax financial income S146,000 DTA Year 3 Date Account title and explanation PR I Debit! Credit ACC 3250 CH 16-Comprehension check A corporation has pretax financial accounting (book) income of $146,000 in year 3. Additional information (for year 3) is as follows: 1. Municipal bond interest income is $35,000. 2. Life insurance premium expense, 3. Accelerated depreciation is used for tax purposes, while straight-line is used for books. Tax depreciation is $10,000; book depreciation is $5,000. 4. Estimated warranty expense of $500 is accrued for book purposes where the corporation is the beneficiary. per books is $4,000. Additional details that may affect amounts in Year 3- Year 5 a. On 1/1/Yl the enterprise acquired a depreciable asset for S 30,000 that had an estimated life of six years and is depreciated on a straight-line basis for book purposes. For tax purposes, the asset is depreciated using the straight-line election under MACRS and qualifies as a three-year asset. The depreciation for each year under MACRS is as follows: (Year 1 $5,000; Year 2 S10,000; Year 3 $10,000; Year 4 $5,000) b. The enterprise deducted warranty expense of $500 for book purposes in year 3 that is expected to be deductible for tax purposes in year 4. c. Taxable income was $112,000 in Year 4, and $113,500 in Year 5. d. The applicable tax rate is 40% for all years affected. Required i. Complete the following helper schedule for depreciation and warranty cost. Book depreciation Tax depreciation 5,000 5,000 5,000 10,000 Yr 3 5,000 10,000 Yr 4 5,000 5,000 Yr 5 5,000 ii. Determine taxable income for Year 3 and prepare the necessary income tax related journal entry (entries) DTL Pretax financial income S146,000 DTA Year 3 Date Account title and explanation PR I Debit! Credit