Question

17-5

conformity between its taxable income and income before taxes. BE17-1. Income Taxes Payable. Immox Company has conformity between its taxab In Immox's taxes payable are $140,000 and its tax rate is 40%, what is its net income BE17-2. Income Taxes Payable. Limmox Company has conformity between its tas taxes. Limmox Company's net income after taxes is $195,000 ang rmity between its taxable income and income before et income after taxes is $195,000 and its tax rate is 35%. What is its taxes payable? DE17.1. Permanent Differences, Simmox Company's income before taxes is 590 $40,000 is non-taxable interest income from its investment in mun ox Company's income before taxes is $290,000 and its tax rate is 35%. Note that There are no other book-tax differences. What are Simmox's tax st income from its investment in municipal bonds, and is included in $290,000. income? What are Simmox's tax expense and taxes payable? What is its net BE17-4. Permanent Differences. Plimmox Company's income before taxes is $410,000 and its taxt included $60,000 in non-deductible fines in the $410,000.1 pany's income before taxes is $410,000 and its tax rate is 35%. Plimmox 000 in non-deductible fines in the $410,000. There are no other book-tax differences. What are its tax expense and taxes payable? What is its net income? BE17-5. Permanent Differences. Reconciliation of Statutory Tax Rate to Effective Tax Rate. Simmox Companys income before taxes is $290,000 and its tax rate is 35%. Note that $40.000 is non-taxable interest income from its investment in municipal bonds, and is included in $290,000. There are no other book-tax differences. Prepare a reconciliation of Simmox's statutory tax rate to its effective tax rate. BE17-6. Permanent Differences, Reconciliation of Statutory Tax Rate to Effective Tax Rate. Plimmox Companys income before taxes is $410,000 and its tax rate is 35%. Plimmox included $60,000 in non-deductible fines in the $410,000. There are no other book-tax differences. Prepare a reconciliation of Plimmox's statutory tax rate to its effective tax rate. BE17-7. Temporary Differences, Deferred Tax Liability. The Marlena Group uses straight-line depreciation for financial reporting purposes and accelerated depreciation on its tax returns. The company reported $40,000 in income before tax and depreciation for book purposes. The equipment has an original cost of $20,000. Straight-line depreciation is $2,000 while accelerated depreciation amounts to $6,000 for the asset's first year of utilization. There are no other book-tax differences. a. What is the book basis of the equipment at the end of the first year? b. What is the tax basis of the equipment at the end of the first year? . Compute the deferred tax liability, income tax payable, and income tax expense for the current year assum- ing that Marlena is subject to a 40% tax rate.

Answer 1

A. Book basis at the end of first year = $20000 - $2000 = $18000

B. Tax basis at the end of first year = $20000 - $6000 = $14000

C. Deferred Tax Liability = (Book basis - Tax Basis) X tax rate = (18000 - 14000) X 40% = $1600

Income tax payable = (income before tax and depreciation - tax depreciation) X tax rate = ($40000 - $6000) X 40% = $13600

Income tax expense = income tax payable + deferred tax liability = $13600 + $1600 = $15200