Schedule to reconcile accounting and taxable income


Question 1. The records of Nepomuzeno, Inc. provided the following information

                           2012          2013      2014          2015
Pretax income      90,000      92,000     95,000      98,000
Taxable income    63,000    101,000    104,000    107,000

Income Tax rate 30% for all years

The above amounts include only two temporary differences;

a. Installment sales for accounting purposes in 2012, $30,000 included in tax return, $10,000 each year from 2013 to 2015

b. Cost of warranties for accounting purposes, $4,000 in 2012, deducted for income tax $1,000 each year from 2012 to 2015

Required to do:

1. Prepare schedule to reconcile accounting and taxable income and to compute taxes payable

2. Prepare a schedule of temporary differences and deferred income taxes

3. Prepare Journal entry for each year

4. Show how income tax expenses, deferred income tax asset or liability and income taxes payable should be reported on the financial statements for each year.

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Accounting Basics: Schedule to reconcile accounting and taxable income
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