Oriole, Inc. had pre-tax accounting income of $1800000 and a tax rate of 30% in

Question

Oriole, Inc. had pre-tax accounting income of $1800000 and a tax rate of 30% in 2018, its first year of operations. During 2018 the company had the following transactions:

Received rent from Jane, Co. for 2019

$87000

Municipal bond income

$111000

Depreciation for tax purposes in excess of book depreciation

$51000

Installment sales profit to be taxed in 2019

$153000

For 2018, what is the amount of income taxes payable for Oriole, Inc?

a) $419,400

b) $471,600

c) $594,000

d) $504,900

Received rent from Jane, Co. for 2019

$87000

Municipal bond income

$111000

Depreciation for tax purposes in excess of book depreciation

$51000

Installment sales profit to be taxed in 2019

$153000

Explanation / Answer

Firstly we need to compute taxable income which will be calculated by adjusting pre-tax accounting income.

  Calculation of Taxable Income (Amount in $)

Income tax payable for Oriole, Inc fo 2018 = Taxable Income*Tax Rate

= $1,572,000*30% = $471,600

Therefore the correct answer is b) $471,600.

Pre-tax Accounting Income 1,800,000 Add: Received rent from Jane, Co. for 2019 to be taxed in 2018 87,000 Less: Municipal bond income (Not taxable) (111,000) Less: Depreciation for tax purposes in excess of book depreciation (51,000) Less: Installment sales profit to be taxed in 2019 (153,000) Taxable Income 1,572,000

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