Date Account Titles and Explanation Debit Credit Open Show Work The following in

Question

Date

Account Titles and Explanation

Debit

Credit

Open Show Work

The following information is available for Ayayai Corporation for 2017.
1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $114,000. This difference will reverse in equal amounts of $28,500 over the years 2018–2021. 2. Interest received on municipal bonds was $10,200. 3. Rent collected in advance on January 1, 2017, totaled $61,800 for a 3-year period. Of this amount, $41,200 was reported as unearned at December 31, 2017, for book purposes. 4. The tax rates are 40% for 2017 and 35% for 2018 and subsequent years. 5. Income taxes of $308,000 are due per the tax return for 2017. 6. No deferred taxes existed at the beginning of 2017.

Explanation / Answer

Solution 1:

Income tax payable for 2017 = $308,000

Income tax rate for 2017 = 40%

Taxable income for 2017 = $308,000 / 40% = $770,000

Computation of Pretax financial income - Ayayai Corporation Particulars Amount Taxable Income $770,000.00 Add: Excess Depreciation as per income tax $114,000.00 Add: Interest on muncipal bonds $10,200.00 Less: Unearned rent $41,200.00 Pretax financial income $853,000.00

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