Question
The Stephen's Marine Construction Company began operations in January 2019. After the first year of operations, the following information was provided to you for year
The Stephen's Marine Construction Company began operations in January 2019. After the first year of operations, the following information was provided to you for year ending December 31, 2019.
1. Pretax financial statement income: $805,600
2. Differences between financial statement income and
tax return income were as follows:
a. Gross profit reported on long-term contracts was
$175,000 on the financial statement, and $60,000
on the tax return.
b. Depreciation expense was $14,000 on the financialstatement, and $28,000 on the tax return.
c. The company was fined $8,000 for OSHA violations on
a construction project. The fine was reported as anexpense in the financial statements; however, it is not deductible for tax purposes.
d. The company reported "unearned" revenue of $25,000 on
the balance sheet as of December 31, 2019, however, on
the tax return the $25,000 was taxable income in 2019.
Required
a. Prepare a schedule to reconcile F/S income to T/R income.
b. Prepare all journal entries to account for taxes in 2019.
Note: Tax rate is 40%
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