Compute the taxable income for 2018

Reference no: EM133505507

Question: Buddy's end of year pretax financial income for 2018 was $720,000. Included in it was $40,000 in interest income on municipal bonds, warranty expense accrued for $15,000, a $25,000 fine for dumping hazardous waste, and depreciation of $40,000. Depreciation for tax purposes was $65,000. Their tax rate was 21%.

Instructions:

1 Compute the taxable income for 2018.

2 Compute the deferred taxes at December 31, 2018 that relate to the temporary differences described above.

3 Prepare the journal entries to record income tax expense, deferred taxes, and income taxes payable for 2018.

4 Format the income tax expense section of the income statement, starting with "income before income taxes".

Reference no: EM133505507

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