Odiak Company had pretax accounting income for the year ended December 31, 2020 of $860,000. Odiak had also identified the following differences between pretax accounting income, and taxable income.

• Pretax accounting income included municipal bond interest in the amount of $12,000.
• MACRS depreciation, used for tax reporting purposed, was $20,000 greater than straight-line depreciation recorded in pretax accounting income for 2020. At the beginning of 2020, the tax basis of Kodiak's assets was $40,000 lower than their net book value, due to prior differences in depreciation.
• The company has a product warranty program in place for its electronic products. During 2020, the warranty accrual in pretax accounting income was $14,000 greater than actual warranty costs incurred. At the end of 2020, the balance in the warranty accrual account was $50,000.
• The company previously in 2019 had accrued a loss contingency in the amount of $30,000. This amount was paid in 2020.

Kodiak has existing balances of $10,000 in its deferred tax liability, and $9,000 in its deferred tax asset accounts, respectively.

Required:

1. Prepare the Journal Entry to record income tax income for 2020. Provide supporting calculations.

2. How much is Kodiak's Net Income for 2020.

3. What is Kodiak's effective tax rate for 2020

Answer rating: 100% (QA)

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