E 1613 Multiple differences; calculate taxable income

LO161, LO164, LO166

Southern Atlantic Distributors began operations in January 2018 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 2018, 30% in 2019, and 20% in 2020. Pretax accounting income for 2018 was $300,000, which includes interest revenue of $40,000 from municipal bonds. The enacted tax rate is 40%.

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 2018.

2. What is Southern Atlantics 2018 net income?