Explore BrainMass

Explore BrainMass

    Computing taxable income for current year

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    © BrainMass Inc. brainmass.com June 3, 2020, 10:33 pm ad1c9bdddf
    https://brainmass.com/business/accounting/computing-taxable-income-current-year-236895

    Solution Summary

    The solution examines computing taxable income for the current year. The excess of tax depreciation over book depreciation is determined.

    $2.19

    ADVERTISEMENT