Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $3550000 Estimated litigation expense 4550000 Extra depreciation for taxes (6540000) Taxable income $ 1560000 The estimated litigation expense of $4550000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2180000 in each of the next 3 years. The income tax rate is 20% for all years.
Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $3550000 Estimated litigation expense 4550000 Extra depreciation for taxes (6540000) Taxable income $ 1560000 The estimated litigation expense of $4550000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2180000 in each of the next 3 years. The income tax rate is 20% for all years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
32.
Blossom Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
The estimated litigation expense of $4550000 will be deductible in 2021 when it is expected to be paid. Use of thedepreciable assets will result in taxable amounts of $2180000 in each of the next 3 years. The income tax rate is 20% for all years.
Income taxes payable is
Pretax financial income | $3550000 |
Estimated litigation expense | 4550000 |
Extra depreciation for taxes | (6540000) |
Taxable income |
$ 1560000
|
The estimated litigation expense of $4550000 will be deductible in 2021 when it is expected to be paid. Use of the
Income taxes payable is
$0.
$312000.
$398000.
$598000.
Expert Solution
Step 1
Solution
Given
Pretax financial income =$3550000
Estimated litigation expense =4550000
Extra depreciation for taxes =(6540000)
Taxable income =$ 1560000
Tax rate =20%
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