Pharoah Company began operations at the beginning of The following information pertains
to this company.
Pretax financial income for is $
The tax rate enacted for and future years is
Differences between the income statement and tax return are listed below:
a Warranty expense accrued for financial reporting purposes amounts to $
Warranty deductions per the tax return amount to $
b Gross profit on construction contracts using the percentageofcompletion
method per books amounts to $ Gross profit on construction contracts for
tax purposes amounts to $
c Depreciation of property, plant, and equipment for financial reporting purposes
amounts to $ Depreciation of these assets amounts to $ for the tax
return.
d A $ fine paid for violation of pollution laws was deducted in computing
pretax financial income.
e Interest revenue recognized on an investment in taxexempt municipal bonds
amounts to $
Taxable income is expected for the next few years. Assume a is shortterm in nature;
assume b and c are longterm in nature.
