Computing taxable income for current year
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The following differences between financial and taxable income were reported by Dider Corporation for the current year.
(a) Excess of tax depreciation over book depreciation $60,000
(b) Interest revenue on municipal bonds 9,000
(c) Excess of estimated warranty expense over actual expenditures 54,000
(d) Unearned rent received 12,000
(e) Amortization of goodwill 30,000
(f) Excess of income reported under percentage-of-completion
accounting for financial reporting over completed-contract
accounting used for tax reporting 45,000
(g) Interest on indebtedness incurred to purchase tax-exempt
securities 3,000
(h) Unrealized losses on marketable securities recognized for
financial reporting 18,000
Assume that Dider Corporation had pretax accounting income [before considering items (a) through (h)] of $900,000 for the current year. Compute the taxable income for the current year.
________________________________________________________________________
This is what I have so far:
Dider Corporation
Pretax financial income (from income statement) $900,000
Add (deduct) permanent differences:
Nontaxable revenues (12,000)
Nondeductible expenses 30,000
_______
18,000
Financial Income subject to tax 918,000
Add (deduct) temporary differences:
Excess of tax depreciation over book depreciation (60,000)
Excess of estimated warranty expenses over actual
expenditures 54,000
Unearned rent received 12,000
Excess of income reported under percentage-of-completion
accounting for financial reporting over completed-
contract accounting used for tax reporting (45,000)
Unrealized losses on marketable securities recognized for
financial reporting 18,000
Taxable income $897,000
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Solution Summary
The solution examines computing taxable income for the current year. The excess of tax depreciation over book depreciation is determined.
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