The following information relates to Robert Company for the year ended December 31, 2020, its...
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Accounting
The following information relates to Robert Company for the year ended December 31, 2020, its first year of operations. The firm reports pretax financial statement income of $325,000. The enacted income tax rate is 25% for 2020 and future years.
The following are differences between pretax financial statement income and taxable income for 2020:
Financial Statements
Tax Return
Revenues
$ 897,000
$ 935,000
Interest income*
$ 9,000
$ 6,500
Warranty expenses
$ 32,000
$ 27,000
Depreciation expense
$ 95,000
$ 160,000
*Difference in interest income relates to non-taxable municipal bond interest.
Instructions
Determine the effective tax rate for Robert in 2020.
Why is the effective rate different from the statutory, enacted rate of 25%?
How much net income will Robert report for 2020?
Answer & Explanation
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