Question: For the year ended December 31, 2016, Joey Co. reported pretax accounting income of $977,000. Selected information for 2015 from Joey Co.'s records follows:
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Interest Income on Municipal Bonds
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$32,000
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Depreciation claimed on the 2016 tax return in excess of depreciation on the income statement
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$55,000
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Warranty Expense reported on the Income Statement
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$26,000
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Actual Warranty expenditures in 2016
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$16,000
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Joey Co.'s income tax rate is 35%. At January 1, 2016, Joey Co.'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 in 2016 and prepare the appropriate journal entry.
2) What is Joey's 2016 Net Income? [Show your answer by preparing the Income tax section of the Income Statement].
3) Based on the new FASB Reporting model that was discussed in class, how would the Deferred taxes be reported on the balance Sheet?