Assume the following facts for Munoz Company in 2016. Munoz reported pretax financial income of $800,000....

Assume the following facts for Munoz Company in 2016. Munoz reported pretax financial income of $800,000. In addition, Munoz reported the following differences between its pretax financial income and taxable income: • Interest income of $80,000 was received during 2016 from an investment in municipal bonds. This income is exempt for tax purposes. • Rent income of $40,000 was collected in 2015 and included for tax purposes during that year. For financial statement purposes, it will be reported as earned equally in 2016 and 2017. • An asset with a 5-year life was purchased during 2016; straight-line depreciation for book purposes was $50,000. MACRS depreciation expense for 2016 was $100,000. • Warranty expense of $20,000 was recognized on the 2016 income statement, while $4,000 was recognized for tax purposes. (Assume a 1-year warranty contract.) The balance of the Deferred Tax Asset account (debit) at January 1, 2016, was $16,000 as a result of the rent income temporary difference. The tax rate for all years was 40%. Munoz has positive verifiable evidence of future taxable income. Required: 1. Calculate the amount of Munoz’s 2016 taxable income. 2. Prepare Munoz’s income tax journal entry at the end of 2016. 3. Calculate Munoz’s effective income tax rate for 2016.

Expert Solution

Possible answer is enclosed

ekkarill92 answered 2 years ago

Assume the following facts for Munoz Company in 2019. Munoz reported pretax financial income of $800,000....

Assume the following facts for Munoz Company in 2019. Munoz reported pretax financial income of $800,000. In addition, Munoz reported the following differences between its pretax financial income and taxable income: • Interest income of $60,000 was received during 2019 from an investment in municipal bonds. This income is exempt for tax purposes. • Rent income of $40,000 was collected in 2018 and included for tax purposes during that year. For financial statement purposes, it will be reported as earned...

Colt Company reports pretax financial “income” of $143,000 in 2016. In addition to pretax income from...

Colt Company reports pretax financial “income” of $143,000 in 2016. In addition to pretax income from continuing operations (of which revenues are $295,000), the following items are included in this pretax “income:” Problems Colt's taxable income totals $93,000 in 2016. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2016, Colt had a retained earnings balance of...

The DeVille Company reported pretax accounting income on its income statement as follows: 2016 $...

The DeVille Company reported pretax accounting income on its income statement as follows: 2016 $ 390,000 2017 310,000 2018 380,000 2019 420,000 Included in the income of 2016 was an installment sale of property in the amount of $44,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $17,600 in 2017, $22,000 in 2018, and $4,400 in 2019. Included in the 2018 income was $18,000...

Meyer reported the following pretax financial income (loss) for the years 2012-2016 2012 $240,000 2013 200,000...

Meyer reported the following pretax financial income (loss) for the years 2012-2016 2012 $240,000 2013 200,000 2014 150,000 2015 (500,000) 2016 180,000 pretax financial income (loss) and taxable income (loss) were the same for all the years involved. The enacted tax rate was 34% for 2012 and 2013 and 38% for 2014-2016. Assume the carryback provision is used first for net operating losses. In 2015, based on the weight of available evidence, it is more likely than not that one-fifth...

Question 3 Starlight reported the following pretax financial income (loss) for the years 2018–2021. Pretax Income...

Question 3 Starlight reported the following pretax financial income (loss) for the years 2018–2021. Pretax Income (Loss) Tax Rate 2018 330,000 35% 2019 (60,000) 35% 2020 (800,000) 21% 2021 30,000 21% Pretax financial income (loss) and taxable income (loss) were the same for all years involved. Instruction Prepare the journal entries for the years 2019 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. Additionally, assume that based on the weight of available...

(NOL Carryforward, Valuation Account Needed) Topper Company reported the following pretax financial income (loss) for the...

(NOL Carryforward, Valuation Account Needed) Topper Company reported the following pretax financial income (loss) for the years 2018 through 2022: 2018 $ 70,000 2019 45,000 2020 (260,000) 2021 90,000 2022 215,000 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 30% for 2018 through 2020, and 20% for 2021 and thereafter. Instructions (a) Prepare the journal entries for the years 2018 through 2022 to record income tax expense, income...

Topper Company reported the following pretax financial income (loss) for the years 2014 through 2017. 2014...

Topper Company reported the following pretax financial income (loss) for the years 2014 through 2017. 2014 $ 75,000 2015 $ 47,000 2016 $(225,000) 2017 $ 89,000 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 25% for all years. Assume the governing laws allowed for a two-year carryback and 20-year carryforward and that the carryback provision is used. a) Prepare the journal entries for 2015, 2016, and 2017. Show...

Sherrod, Inc., reported pretax accounting income of $100 million for 2016. The following information relates to...

Sherrod, Inc., reported pretax accounting income of $100 million for 2016. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2018 exceeded that reported for tax purposes by $8 million. The installment receivable account at year-end had a balance of $10 million (representing portions of 2017 and 2018 installment sales), expected to be collected equally in 2019 and 2020. Sherrod was assessed a penalty...

The pretax financial income (or loss) figures for Tamarisk Company are as follows. 2016 275,000 2017...

The pretax financial income (or loss) figures for Tamarisk Company are as follows. 2016 275,000 2017 88,000 2018 (176,000 ) 2019 (115,000 ) 2020 148,000 2021 108,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2016, and a 20% tax rate for the remaining years. Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net...

The pretax financial income (or loss) figures for Concord Company are as follows. 2015 $166,000 2016...

The pretax financial income (or loss) figures for Concord Company are as follows. 2015 $166,000 2016 258,000 2017 77,000 2018 (166,000 ) 2019 (384,000 ) 2020 131,000 2021 105,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2015 and 2016 and a 20% tax rate for the remaining years. Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the...

Question