Question

eBook Calculator E Print Item Problem 14-26 (LO. 1, 4) Rubio, Inc., an accrual basis C corporation, reports the following amounts for the tax year. The applicable income tax rate is 30% (combined Federal, stand global). Book income including the items below $80,000 Interest income from City of Westerville bonds 10,000 17,000 Bribes paid to Federal inspectors Liability for anticipated warranty costs (beginning of year) ability for anticipated warranty costs (end of year) 20,000 25,000 a. Rubio's income tax expense is $ 25,500 X, and GAAP income for the year is $ 85,000 X b. Select the appropriate computations as Microsoft Excel commands from below. MAX(0,(BOOK+NETDIFFS*RATE))=CURRENT; DTA_11-DTA1231=DEFERRED; PROVISION=CURRENT-DEFERRED Feedback Check My Work A corporation's financial statements are prepared in accordance with GAAP. The purpose and objectives of these statements are quite different from the objective of the corporation's income tax return. The total book tax expense under ASC 740 (SFAS 109) is made up of both current and deferred components.

Answer 1

Computation of Rubio's Tax

Particulars	Amt in $
Net Book Income as per Question	80,000
+ Bribes Paid to federal Inspectors	17,000
- Provision for Anticipated Warranty Cost	25,000
Net Book Income (After Adjustments) - GAAP Income	72,000
Rubio's Income tax is - 30%	21,600

Note:

Since Net Book Income Includes all the items adjusted

1.  Interest earned, which is typically paid every six months, is taxed at the federal and state levels hence it need not be adjusted

2. Payments made to officials or employees of any government other than a foreign government are not deductible Income Tax Purpose Hence Bribe must be added back

3. Provisions for warranty liability is deductible for income-tax purposes and the amt deductible will be the amount charged in the current year P&L Hence due to Accrual system entire 25000 is deducted