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calculation of taxable income using the information given in exercise 16 ndash 23 an 692731

Calculation of Taxable Income

Using the information given in Exercise 16–23 and assuming pretax financial income of $3,100,000, calculate taxable income.

Exercise 16–23

Identification of Temporary Differences

Indicate which of the following items are temporary differences and which are nontaxable or nondeductible. For each temporary difference, indicate whether the item considered alone would create a deferred tax asset or a deferred tax liability.

(a) Tax depreciation in excess of book depreciation, $150,000.

(b) Excess of income on installment sales over income reportable for tax purposes, $130,000.

(c) Premium payment for life insurance policy on president, $95,000.

(d) Rent collected in advance of period earned, $75,000.

(e) Warranty provision accrued in advance of period paid, $40,000.

(f) Interest revenue received on municipal bonds, $30,000.

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