Reference no: EM13153808
The following information is available for Swanson Corporation for 2006.
1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $100,000. This difference will reverse in equal amounts of $25,000 over the years 2007-2010.
2. Interest received on municipal bonds was $10,000.
3. Rent collected in advance on January 1, 2006, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, for book purposes.
4. The tax rates are 40% for 2006 and 35% for 2007 and subsequent years.
5. Income taxes of $360,000 are due per the tax return for 2006.
6. No deferred taxes existed at the beginning of 2006.
(a) Compute taxable income for 2006.
(b) Compute pretax financial income for 2006.
(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2006 and 2007. Assume taxable income was $980,000 in 2007.
(d) Prepare the income tax expense section of the income statement for 2006, beginning with "Income before income taxes."