Chart of Accounts ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 161 Deferred Tax Asset-Warranty Expense 162 Deferred Tax Asset-Rent Income 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 260 Deferred Tax Liability 261 Income Taxes Payable REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense Assume the following facts for Munoz Company in 2019. Munoz reported pretax financial income of $800,000. In addition, Munoz reported the following differences between its pretax financial income and taxable income: - Interest income of $60,000 was received during 2019 from an investment in municipal bonds. This income is exempt for tax purposes. - Rent income of $40,000 was collected in 2018 and included for tax purposes during that year. For financial statement purposes, it will be reported as earned equally in 2019 and 2020 . - An asset with a 5-year life was purchased during 2019; straight-line depreciation for book purposes was $50,000. MACRS depreciation expense for 2019 was $100,000. - Warranty expense of $20,000 was recognized on the 2019 income statement, while $4,000 was recognized for tax purposes. (Assume a 1-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1,2019, was $16,000 as a result of the rent income temporary difference. The tax rate for all years was 40%. Munoz has positive verifiable evidence of future taxable income. Required: 1. Calculate the amount of Munoz's 2019 taxable income. 2. Prepare Munoz's income tax journal entry at the end of 2019 . 3. Calculate Munoz's effective income tax rate for 2019. 1. Calculate the amount of Munoz's 2019 taxable income. Feedback Check My Work Determine the temporary difference. If it decreases taxable income, a deferred tax asset is created because the amount due is deferred to a future period. If the timing difference increases taxable income, a deferred tax liability is recorded. 3. Calculate Munoz's effective income tax rate for 2019. 2. Prepare Munoz's income tax journal entry at the end of 2019, on December 31. General Journal Instructions How does grading work