question archive Mustard Company had depreciation for tax purposes in 2021 of $30,000 but for book purposes only $20,000
Mustard Company had depreciation for tax purposes in 2021 of $30,000 but for book purposes only $20,000
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Mustard Company had depreciation for tax purposes in 2021 of $30,000 but for book purposes only $20,000.
Also in 2021, Mustard recognized a loss from a contingency amounting to $20,000 which the Internal Revenue Service does not allow until it actually occurs which is likely in 2022. Mustard also recognized $14,000 of interest income in its from its investments in tax exempt bonds which the Internal Revenue Service will never regard as income.
Taxes paid in 2021 were $90,000 with a tax rate of 20%.
a) Determine the financial accounting (book) income for 2021
b) Determine the tax expense for 2021.
c) Determine Mustard's effective tax rate for 2021
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Answer:
a. 434,000
b. 90,000
c. 20 %
Step-by-step explanation
a. You have to work back, divide 90000 to 20% to get the taxable income and then reverse the effect of the adjustments to derive the financial accounting income.
b. Taxable income times the tax rate of 20% or it's already given.
c. Already given
