Question
For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,040,000. Selected information for 2021 from Fidelitys records follows: Interest income
For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,040,000. Selected information for 2021 from Fidelitys records follows:
Interest income on municipal governmental bonds | $ | 96,000 |
Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement | 120,000 | |
Carrying amount of depreciable assets in excess of their tax basis at year-end | 216,000 | |
Warranty expense reported on the income statement | 58,000 | |
Actual warranty expenditures in 2021 | 48,000 | |
Fidelity's income tax rate is 25%. At January 1, 2021, Fidelity's records indicated balances of zero and $24,000 in its deferred tax asset and deferred tax liability accounts, respectively. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. 2. What is Fidelitys 2021 net income?
Allmond Corporation, organized on January 3, 2021, had pretax accounting income of $29 million and taxable income of $42 million for the year ended December 31, 2021. The 2021 tax rate is 25%. The only difference between accounting income and taxable income is estimated product warranty costs. Assume that expected payments and scheduled tax rates (based on recently enacted tax legislation) are as follows:
2022 | $ | 4 million | 30 | % |
2023 | 3 million | 30 | % | |
2024 | 4 million | 30 | % | |
2025 | 2 million | 25 | % | |
Required: 1. Determine the amounts necessary to record Allmonds income taxes for 2021 and prepare the appropriate journal entry. 2. What is Allmonds 2021 net income?
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