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Evaluate the situation below, determining the journal entries (if any) that need to be booked...

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Accounting

Evaluate the situation below, determining the journal entries (if any) that need to be booked as a result.

Incremental borrowing rate. 5.0%

Number of common shares authorized. 590,000

Number of common shares issued and outstanding as of the end of last year. 59,000

Par value of common stock. $0.05

Tax rate. 20%

Question 1.

  1. In preparing this years income taxes (which have not been accrued), you have identified the following book-tax differences for the year:

  • You collected $40,000 of payment up front for a product to be delivered next year. This amount is taxable when received.

  • You received nontaxable municipal bond interest income of $15,000.

Explain reasoning for methods used and how calculations were made.

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