P19-3(a) Second Year of Depreciation Difference, Two Differences, Single Rate, Extraordinary Item
The following information has been obtained for the Gocker Corporation.
1. Prior to 2010, taxable income and pretax financial income were identical.
2. Pretax financial income is $1,718,300 in 2012 and $1,405,100 in 2013.
3. On January 1, 2010, equipment costing $1,264,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.)
4. Interest of $69,800 was earned on tax-exempt municipal obligations in 2013.
5. Included in 2013 pretax financial income is an extraordinary gain of $206,200, which is fully taxable.
6. The tax rate is 39% for all periods.
7. Taxable income is expected in all future years.
1. Compute taxable income and income taxes payable for 2013.