e) Bridgeton Company started its operations at the beginning of 2018. The following information relates...
80.2K
Verified Solution
Question
Accounting
e) Bridgeton Company started its operations at the beginning of 2018. The following information relates to its operations for the year. The differences between the 2018 income statement and tax return are listed below:
Fines incurred for pollution violations of $7,320 were deducted in computing pretax financial income.
Warranty expense accrued for financial reporting purposes amounts to $15,910. Warranty deductions per the tax return amount to $8,730.
Interest revenue earned on an investment in tax-exempt bonds amounts to $2,570.
Depreciation of property, plant and equipment for financial reporting purposes amounts to $80,500. Depreciation of these assets amounts to $102,000 for the tax return.
Income on construction contracts using the percentage of completion method per books amounts to $99,000. Income on contracts for tax purposes amounts to $64,300.
Sales on an accrual basis were $76,890. For tax purposes $60,450 was recorded on the installment sales method.
Interest received on governmental bonds was $41,500.
Rent collected in advance in January 1, 2018 totaled $72,000 for a 4 year period. Of this amount, $54,000 was reported unearned at December 31, for book purposes.
Pretax financial income for 2018 is $477,600 and the tax rate is 30%.
Taxable income is expected for the next few years.
Instructions
i. Compute taxable income for 2018. (5 marks)
ii. Compute the deferred taxes at December 31, 2018, that relate to the temporary differences described above. Clearly label them as deferred tax asset or liability. (5 marks)
iii. Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2018. (4 marks)
iv. Draft the income tax expense section of the income statement, beginning with Income before income taxes. (3 marks)
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.