Multiple tax rates
Response to the following problem:
Allmond Corporation, organized on January 3, 2016, had pretax accounting income of $14 million and taxable income of $20 million for the year ended December 31, 2016. The 2016 tax rate is 35%. The only difference between accounting income and taxable income is estimated product warranty costs. Expected payments and scheduled tax rates (based on recent tax legislation) are as follows:
|
2017
|
$2 million
|
30%
|
|
2018
|
1 million
|
30%
|
|
2019
|
1 million
|
30%
|
|
2020
|
2 million
|
25%
|
Required:
1. Determine the amounts necessary to record Allmond's income taxes for 2016 and prepare the appropriate journal entry.
2. What is Allmond's 2016 net income?