Questions

1) compute taxable income and income taxes payable for 2021

The following information has been obtained for Waterway Corporation 1 2. 3. Prior to 2020, taxable income and pretax financial income were identical. Pretax financial income is $1.740,000 in 2020 and $1,484,000 in 2021. On January 1, 2020, equipment costing $1.320,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A) Interest of $65,000 was earned on tax-exempt municipal obligations in 2021. Included in 2021 pretax financial income is a gain on discontinued operations of $198,000, which is fully taxable. The tax rate is 20% for all periods. Taxable income is expected in all future years. 4. 5. 6 7