A reconciliation of pretax financial statement income to taxable income is shown below for Shaw-Anderson Industries for the year ended December 31, 2018, its first year of operations. The company offers quality-assurance warranties that extend six months after goods are purchased. The income tax rate is 40%.

Pretax accounting income (income statement) $ 640,000

Interest revenue on municipal securities (20,000)

Warranty expense in excess of deductible amount 45,000

Depreciation in excess of financial statement amount (120,000)

Taxable income (tax return) $ 545,000

What amount should Shaw-Anderson report as the current portion of income tax expense on its 2018 income statement?

a.$52,000

b.$218,000

c.$248,000

d.$256,000

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22 January, 06:10

A reconciliation of pretax financial statement income to taxable income is shown below for Shaw-Anderson Industries for the year ended December 31, 2018, its first year of operations. The company offers quality-assurance warranties that extend six months after goods are purchased. The income tax rate is 40%.

Pretax accounting income (income statement) $ 640,000

Interest revenue on municipal securities (20,000)

Warranty expense in excess of deductible amount 45,000

Depreciation in excess of financial statement amount (120,000)

Taxable income (tax return) $ 545,000

What amount should Shaw-Anderson report as the current portion of income tax expense on its 2018 income statement?

a.$52,000

b.$218,000

c.$248,000

d.$256,000

+2

Answers (1)

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Kenzie Landry · Answer 1

B

Explanation:

Year end - December 31,2018 (first account year)

Pretax Income - $640,000

Interest expenses ($20,000)

Excess warranty expense add back $45,000

Excess depreciation deducted ($120,000)

Taxable income = $545,000

Tax rate = 40%

Income tax expense for 2018 = $545,000 * 40%

=$218,000