For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $978,000. Selected information
Question:
For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $978,000. Selected information for 2021 from Fidelity’s records follows:
Interest income on municipal governmental bonds ..................................................................................$ 32,000
Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement .......58,000
Carrying amount of depreciable assets in excess of their tax basis at year-end .......................................88,000
Warranty expense reported on the income statement .................................................................................26,000
Actual warranty expenditures in 2021 .............................................................................................................10,000
Fidelity’s income tax rate is 25%. At January 1, 2021, Fidelity’s records indicated balances of zero and .$7,500 in its deferred tax asset and deferred tax liability accounts, respectively.
Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is Fidelity’s 2021 net income?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas