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Big question I cannot figure out? why?

financial accounting far cpa 00830 cpa-00830

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#1 asianprincess91

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Posted 04 February 2014 - 11:06 PM

Hello guys, I'm studying for cap far, and a lot of trouble answering questions for inter period tax. anyone can help?

 

thanks a lot!

 

Dunn Co.'s income statement reported $90,000 income before provision for income taxes. To compute the provision for federal income taxes, the following data are provided:

 

-Rent received in advance $16,000

-Income from exempt municipal bonds $20,000

-Depreciation deducted for income tax purposes in excess of depreciation reported for financial statement purposes $10,000

-Enacted corporate income tax rate 30%

 

 

What amount of current income tax liability should be reported in Dunn's Decemeber 31 balance sheet?

 

Choice "c" is correct. The current tax liability is computed by multiplying the tax rate of 30% times taxable income.

   
 
Pretax financial income 90,000
 
Permanent difference:  
 
Tax exempt bonds income (20,000)
 
Pretax financial income subject to tax 70,000
 
Temporary differences:  
 
Rent (taxable when received) 16,000
 
Depreciation (tax deduction) (10,000)
 
Taxable income 76,000
 
Tax rate × 30%
 
Tax liability 22,800

 

I thought the answer would be: $19,800

 

   
 
Pretax financial income 90,000
 
Permanent difference:  
 
Tax exempt bonds income (20,000)
 
Pretax financial income subject to tax 70,000
 
Temporary differences:  
 
Rent (taxable when received) 16,000
 
Depreciation (tax deduction) (10,000)
 
Taxable income 66,000
 
Tax rate × 30%
 
Tax liability 19,800
 

can some smart person help me understand? maybe its translation from chinese to english that i don't understand? thanks!

 

 



#2 bella.dreamer

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Posted 15 April 2014 - 06:58 PM

Well, 22,800 is correct. How do you get 66,000? Seems like you are subtracting additional 10,000 which is not right. It should be 76000 * .3 = 22,800.







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