Asked by nadezhda kurilov on May 20, 2024
Verified
For the year ending December 31,2015,the RJ Corporation reported book income before taxes of $579,000.During 2015: RJ's book depreciation expense was $25,000 greater than what was allowed for tax purposes due to a reversing difference;RJ accrued $17,750 of warranty expense which is not deductible for tax purposes until 2016;RJ recognized a $29,000 unrealized loss on an investment which is not deductible for tax purposes until the investment is sold;and RJ's book income included municipal bond interest of $19,500.What was RJ Corporation's 2015 income tax expense assuming a tax rate of 40%?
A) $252,500
B) $215,100
C) $243,800
D) $232,500
Municipal Bond Interest
The interest income received from bonds issued by local or state governments, often exempt from federal income tax and sometimes from state and local taxes.
Book Depreciation Expense
The systematic allocation of the cost of a tangible asset over its useful life for accounting purposes, as reflected in the financial statements.
Warranty Expense
Costs incurred by a company for repairing, replacing, or refunding products under warranty, considered a contingent liability until incurred.
- Understand the concepts of temporary and permanent differences in taxable and accounting incomes.
- Distinguish between immediate and postponed tax liabilities and comprehend the method of computing them as per Generally Accepted Accounting Principles.
Verified Answer
MM
Monica McQueenMay 22, 2024
Final Answer :
A
Explanation :
Income taxes payable 252,500**($579,000 + $25,000 + $17,750 + $29,000 - $19,500).40
Learning Objectives
- Understand the concepts of temporary and permanent differences in taxable and accounting incomes.
- Distinguish between immediate and postponed tax liabilities and comprehend the method of computing them as per Generally Accepted Accounting Principles.