Honda reports pretax financial income of $125,000 for 2025. The following items cause taxable income to...

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Honda reports pretax financial income of $125,000 for 2025. The following items cause taxable income to be different from pretax financial income. (1) Revenue recognized on the tax return exceeds that on the book by $30,000. (2) Expense on the tax return exceeds that on the book by $75,000. (3) Interest of $15,000 from state bonds is reported on the book as interest revenue. Honda tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are a $3,000 deferred tax asset and a $12,000 deferred tax liability at the beginning of 2025. Required: 1. Compute taxable income in 2025 and complete the worksheet below (7 points). Prior Yrs Pre-tax fin. Income (Book income | GAAP) Taxable income (Tax income | IRS) Tax rate Income tax payable Desired ending balance Beginning balance Change Current Yr Future Yrl Future Yr2 Future Yr3 Deferred tax assets Deferred tax liabilities 2. Prepare the journal entry for 2025 to record income tax expense, deferred taxes, and income tax payable (1 point). 3. What is the effective tax rate for 2025? Effective tax rate = income tax expense/pre-tax financial income (1 point). Why is it not equal to the statutory rate? 4. On December 31, 2025 balance sheet, does Honda report a net deferred tax asset or liability? In what amount? (1 point). Honda reports pretax financial income of $125,000 for 2025. The following items cause taxable income to be different from pretax financial income. (1) Revenue recognized on the tax return exceeds that on the book by $30,000. (2) Expense on the tax return exceeds that on the book by $75,000. (3) Interest of $15,000 from state bonds is reported on the book as interest revenue. Honda tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are a $3,000 deferred tax asset and a $12,000 deferred tax liability at the beginning of 2025. Required: 1. Compute taxable income in 2025 and complete the worksheet below (7 points). Prior Yrs Pre-tax fin. Income (Book income | GAAP) Taxable income (Tax income | IRS) Tax rate Income tax payable Desired ending balance Beginning balance Change Current Yr Future Yrl Future Yr2 Future Yr3 Deferred tax assets Deferred tax liabilities 2. Prepare the journal entry for 2025 to record income tax expense, deferred taxes, and income tax payable (1 point). 3. What is the effective tax rate for 2025? Effective tax rate = income tax expense/pre-tax financial income (1 point). Why is it not equal to the statutory rate? 4. On December 31, 2025 balance sheet, does Honda report a net deferred tax asset or liability? In what amount? (1 point).

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Compute taxable income in 2025 and complete the worksheet Prior Yrs Current Yr Future Yrl Future Yr2 ... View the full answer