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Current and deferred income tax calculations

The information that follows pertains to Raymond Company. Temporary differences for the year 2006 are summarized below.

Expenses deducted on the tax return, but not included on the income statement:
Depreciation $60,000
Prepaid expense 8,000

Expenses reported on the income statement, but not deducted on the tax return:
Warranty expense 9,000

? No temporary differences existed at the beginning of 2006.
? Taxable income was $8,000 for 2006.
? Income statement for the year included $6,000 interest on municipal bonds.
? The tax rate is 30%.

Prepare the journal entry to record the tax provision for 2006. Provide supporting computations.

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Please spend a little time with these calculations to be sure that you understand.

Usually these calculations are done beginning with financial income and ...

Solution Summary

The solution analyzes the various differences between book income and tax income for Raymond Company to calculate current and deferred income tax assets and liabilities. A schedule is prepared followed by journal entries and then a proof to confirm the amount of total tax expense.