Q1. The following information is available for the first three years of operatio

Question

Q1. The following information is available for the first three years of operations for Cooper Company: 1. Year Taxable Income 2017 $500,000 2018 375,000 2019 400,000 2. On January 2,2017, heavy equipment costing $800,000 was purchased. The equipment hada life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below: Tax Depreciation 2019 $264,000$360,000 $120,000 $56,000 $800,000 2017 2018 2020 Total 3. The enacted tax rates are 40% for all years. Instructions (a) Compute the pretax income for 2017. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2017.

Explanation / Answer

Solution a:

Solution b:

Computation of Pre Tax Income for 2017 - Cooper Company Particulars Amount Taxable Income $500,000.00 Add: Depreciation as per income tax $264,000.00 Less: Depreciation as per books $160,000.00 Pre tax income $604,000.00

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