Question

At the end of the year, Sheridan Co. has pretax financial income of $553,000. Included in the $553,000 is $74,000 interest income on municipal bonds, $25,000 fine for dumping hazardous waste, and depreciation of $62,400. Depreciation for tax purposes is $46,800. Compute income taxes payable, assuming the tax rate is 30% for all periods.

Answer 1

Answer:

$140,880

Explanation:

Taxable Income:

= Pre tax financial income - Interest income from municipal bond - fine for dumping hazardous waste + Depreciation as per books - Depreciation as per income tax

=  $553,000 - $74,000 - $25,000 +  $62,400 - $46,800

= $469,600

Therefore,

Income tax payable = Taxable Income × Tax rate

                                 = $469,600 × 30%

                                 = $140,880