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Chapter 19: 13Q (page 1093)

At the end of the year, Falabella Co. has pretax financial income of \(550,000. Included in the \)550,000 is \(70,000 interest income on municipal bonds, \)25,000 fine for dumping hazardous waste, and depreciation of \(60,000. Depreciation for tax purposes is \)45,000. Compute income taxes payable, assuming the tax rate is 30% for all periods.

Short Answer

Expert verified

Fine or penalty is the type of payment an organization makes to the associated authority for which therules and regulations are violated. It is claimed under the income tax payable amount.

Step by step solution

01

Given the following

Particulars

Amount

Pretax financial income

$550,000

Interest income on municipal bonds

$70,000

Fine

$25,000

Depreciation

$60,000

Depreciation for tax purpose

$45,000

Tax rate

30%

02

Computation of income tax payable

Particulars

Amount

Pretax financial income

$550,000

Less: Interest income

$70,000

Add: Fine

$25,000

Add: Depreciation $60,000-$45,000

$15,000

Taxable income

$520,000

Multiply: Tax rate

30%

Income tax payable

$156,000

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Most popular questions from this chapter

How are deferred tax assets and deferred tax liabilities reported on the statement of financial position under IFRS?

Assume the same information as E19-12, except that at the end of 2016, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $45,000. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized in full. (b) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that none of the deferred tax asset will be realized.

Andy McDowell Co. establishes a \(100 million liability at the end of 2017 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2018. Also, at the end of 2017, the company has \)50 million of temporary differences due to excess depreciation for tax purposes, \(7 million of which will reverse in 2018. The enacted tax rate for all years is 40%, and the company pays taxes of \)64 million on \(160 million of taxable income in 2017. McDowell expects to have taxable income in 2018. Instructions (a) Determine the deferred taxes to be reported at the end of 2017. (b) Indicate how the deferred taxes computed in (a) are to be reported on the balance sheet. (c) Assuming that the only deferred tax account at the beginning of 2017 was a deferred tax liability of \)10,000,000, draft the income tax expense portion of the income statement for 2017, beginning with the line 鈥淚ncome before income taxes.鈥� (Hint: You must first compute (1) the amount of temporary difference underlying the beginning $10,000,000 deferred tax liability, then (2) the amount of temporary differences originating or reversing during the year, and then (3) the amount of pretax financial income.)

In 2017, Amirante Corporation had pretax financial income of \(168,000 and taxable income of \)120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to be reported as income taxes payable at December 31, 2017.

Meyer reported the following pretax financial income (loss) for the years 2015鈥�2019. 2015 $240,000 2016 350,000 2017 120,000 2018 (570,000) 2019 180,000 Pretax financial income (loss) and taxable income (loss) were the same for all the years involved. The enacted tax rate was 34% for 2015 and 2016, and 40% for 2017鈥�2019. Assume the carryback provision is used for the net operating losses. Instructions (a) Prepare the journal entries for the years 2017鈥�2019 to record the income tax expense, income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carryforward will not be realized. (b) Prepare the income tax section of the 2018 income statement beginning with the line 鈥淚ncome (loss) before income taxes.鈥�
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