Zurich Co. reports pretax financial income of $70,000 for 20 x 1. The following items cause taxable income to be different than pretax financial income:
• Depreciation on the tax return is greater than depreciation on the income statement by $16,000.
• Rent collected on the tax return is greater than rent earned on the income statement by $22,000.
• Fines for pollution appear s an expense of $11,000 on the income statement. Zurich’s tax rate is 30% for all years and the company expects to report taxable income in all future years.
a) Compute taxable income for 20 x 1.
b) Prepare the journal entry to record income tax expense, deferred income tax, and income tax payable for 20 x 1
c) Prepare the income tax expense section of the income statement for 20 x 1, beginning with the line “Income before income taxes.”
