For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $977,000.Selected information for 2018 from Fidelity’s records follows:Interest income on municipal bonds $32,000Depreciation claimed on the 2018 tax return in excess of depreciation on the income statement 55,000Carrying amount of depreciable assets in excess of their tax basis at year-end 85,000Warranty expense reported on the income statement 26,000Actual warranty expenditures in 2018 16,000Fidelity’s income tax rate is 40%. At January 1, 2018, Fidelity’s records indicated balances of zero and $12,000in its deferred tax asset and deferred tax liability accounts, respectively.Required:1. Determine the amounts necessary to record income taxes for 2018, and prepare the appropriate journal entry.2. What is Fidelity’s 2018 net income?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $977,000.
Selected information for 2018 from Fidelity’s records follows:
Interest income on municipal bonds $32,000
Depreciation claimed on the 2018 tax return in excess of depreciation on the income statement 55,000
Carrying amount of depreciable assets in excess of their tax basis at year-end 85,000
Warranty expense reported on the income statement 26,000
Actual warranty expenditures in 2018 16,000
Fidelity’s income tax rate is 40%. At January 1, 2018, Fidelity’s records indicated balances of zero and $12,000
in its deferred tax asset and deferred tax liability accounts, respectively.
Required:
1. Determine the amounts necessary to record income taxes for 2018, and prepare the appropriate journal entry.
2. What is Fidelity’s 2018 net income?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 8 images

Blurred answer
Knowledge Booster
Accounting for Income Taxes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education