Denver Co. at the end of 20×1, its first year of operations, prepared reconciliationbetween pretax financial income and taxable income as follows:Pretax financial incomeExtra depreciation taken for tax purposesEstimated litigation expenses deductible for taxes when paidRent collected on the tax return is greater than rent reported onthe income statement by $220,000Interest income from Denver municipal bonds$300,000900,0001,500,000100,000Use of the depreciable assets will result in taxable amounts of $300,000 in each of thenext three years. The estimated litigation expenses of $1,500,000 will be deductible in20x4 when settlement is expected.a) Compute the taxable income.b) Prepare the journal entry to record income tax expense, deferred taxes,and income taxes payable for 20×1, assuming a tax rate of 40% for all years.
Denver Co. at the end of 20×1, its first year of operations, prepared reconciliationbetween pretax financial income and taxable income as follows:Pretax financial incomeExtra depreciation taken for tax purposesEstimated litigation expenses deductible for taxes when paidRent collected on the tax return is greater than rent reported onthe income statement by $220,000Interest income from Denver municipal bonds$300,000900,0001,500,000100,000Use of the depreciable assets will result in taxable amounts of $300,000 in each of thenext three years. The estimated litigation expenses of $1,500,000 will be deductible in20x4 when settlement is expected.a) Compute the taxable income.b) Prepare the journal entry to record income tax expense, deferred taxes,and income taxes payable for 20×1, assuming a tax rate of 40% for all years.
Denver Co. at the end of 20×1, its first year of operations, prepared reconciliationbetween pretax financial income and taxable income as follows:Pretax financial incomeExtra depreciation taken for tax purposesEstimated litigation expenses deductible for taxes when paidRent collected on the tax return is greater than rent reported onthe income statement by $220,000Interest income from Denver municipal bonds$300,000900,0001,500,000100,000Use of the depreciable assets will result in taxable amounts of $300,000 in each of thenext three years. The estimated litigation expenses of $1,500,000 will be deductible in20x4 when settlement is expected.a) Compute the taxable income.b) Prepare the journal entry to record income tax expense, deferred taxes,and income taxes payable for 20×1, assuming a tax rate of 40% for all years.
Denver Co. at the end of 20×1, its first year of operations, prepared reconciliationbetween pretax financial income and taxable income as follows:Pretax financial incomeExtra depreciation taken for tax purposesEstimated litigation expenses deductible for taxes when paidRent collected on the tax return is greater than rent reported onthe income statement by $220,000Interest income from Denver municipal bonds$300,000900,0001,500,000100,000Use of the depreciable assets will result in taxable amounts of $300,000 in each of thenext three years. The estimated litigation expenses of $1,500,000 will be deductible in20x4 when settlement is expected.a) Compute the taxable income.b) Prepare the journal entry to record income tax expense, deferred taxes,and income taxes payable for 20×1, assuming a tax rate of 40% for all years.
