The following differences between financial and taxable income were reported by

Question

The following differences between financial and taxable income were reported by Gonzalez-Zabala Corporation for the current year: Excess of tax depreciation over book depreciation $80,000 Interest revenue on municipal bonds 9,000 Excess of estimated warranty expense over actual expenditures 55,000 Unearned rent received 12,000 Fines paid 30,000 Interest on indebtedness incurred to purchase tax-exempt securities 3,000 Unrealized losses on marketable securities recognized for financial reporting 18,000 Assume that Gonzalez-Zabala Corporation had pretax financial income (before considering items through] of $900,000 for the current year. Compute the taxable income for the current year. The following information was taken from Chokr Corporation's 2016 income statement:

Explanation / Answer

Computation of taxable income income as per books 900000 Add:expenses not allowed as per IRS fines paid 30000 unrealised losses 18000 interest incurred on tax exempt 3000 securities unearned rent,taxable as per 12000 IRS on receipt basis excess of estimated warranty expense 55000 118000 1018000 Less:income not taxable as per IRS municipal bond interest 9000 excess of tax depreciation over book 80000 taxable income as per IRS 929000

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