Problem 19B-9 (Part Level Submission) Bramble Company began operations at the be
ID: 2538616 • Letter: P
Question
Problem 19B-9 (Part Level Submission) Bramble Company began operations at the beginning of 2018. The following information pertains to this company. 1. Pretax financial income for 2018 is $92,000 2. The tax rate enacted for 2018 and future years is 40%. 3. Differences between the 2018 income statement and tax return are listed below: Warranty expense accrued for financial reporting purposes amounts to $6,600. Warranty deductions per the tax return amount to $1,800. contracts for tax purposes amounts to $63,300 for the tax return. (a) (b) Gross profit on construction contracts using the percentage-of-completion method per books amounts to $90,300. Gross profit on construction (c) Depreciation of property, plant, and equipment for financial reporting purposes amounts to $54,500. Depreciation of these assets amounts to $77,000 (d) A $3,500 fine paid for violation of pollution laws was deducted in computing pretax financial income. (e) Interest revenue recognized on an investment in tax-exempt municipal bonds amounts to $1,400 4. Taxable income is expected for the next few years. (Assume (a) is short-term in nature; assume (b) and (c) are long-term in nature.) (a) Your answer is correct. Compute taxable income for 2018. Taxable income for 2018 49400 SHOW LIST OF ACCOUNTS SHOW S OLUTION SHOY ANSWERExplanation / Answer
Type Amt Pretax Financial Income 92,000 Add: Warranty Expense Disallowed(6600-1800) Future Deductible Expense 4,800 Less: Profit not Taxable(90300-63300) Future Taxable Expense -27000 Add: Excessive Depreciation Allowed Future Taxable Expense -22500 Add: Expense Disallowed Permanent Difference 3500 Less: Exempted Income Permanent Difference -1400 Taxable Income 49,400 Type Amt Deferred Item Future Deductible Expense 4,800 Deferred Tax Asset Future Taxable Expense -49500 Deferred Tax Liability Deferred Item Amt Deferred Tax Asset 1920 (4800*40%) Deferred Tax Liability 19800 (49500*40%)