ACFI$-492/592$ Exam #$1$ Problems

$23.$ Deferred Taxes $(24$ points$).$

The following differences enter into the reconciliation of financial income and taxable income of Kendall, Inc. for the year ended December $31,2023,$ its first year of operations. The enacted income tax rate is $30\%$ for all years.

$$ Book income $$520,000$

$$ On April $1,2023,$ the company received $$90,000$ for $1$ year$$s rental income which ends March $31,2024.$ The full amount is taxable in $2023.$

$$ The company has chosen to depreciate all its fixed assets on an accelerated basis for tax purposes but on a straight$-$line basis for accounting purposes. The excess tax depreciation over book depreciation is $130,000$ and will reverse equally over a two$-$year period, $2024-2025.$

$$ In $2023$ the company accrued $32,000$ in fines for violation of pollution laws. The full amount will be paid in $2024.$

$$ The company pays life insurance of $$3,000$ each year on the company$$s officers.

Instructions

$($a$)$ Prepare a schedule starting with pretax financial income and compute taxable income