Question

Woody Corp had taxable income of $7,975 in the current year. The amount of MACRS depreciation was $2,900, while the amount of depreciation reported in the income statement was $1,050. Assuming no other differences between tax and accounting income, Woody's pretax accounting income was___.

Answer 1

Woody Corp's pretax accounting income is calculated by adjusting the taxable income by the difference in depreciation methods. After the adjustments, the pretax accounting income is found to be $6,125.

Step-by-step explanation:

The student is asking to calculate Woody Corp's pretax accounting income given the taxable income and the differences in depreciation methods used for tax and accounting purposes. To find the pretax accounting income, we adjust the taxable income by the difference in depreciation. The calculation is as follows:

Taxable Income = Pretax Accounting Income - Accounting Depreciation (Expense reported on Income Statement) + Tax Depreciation (MACRS Depreciation)

$7,975 = Pretax Accounting Income - $1,050 + $2,900

Pretax Accounting Income = $7,975 + $1,050 - $2,900

Pretax Accounting Income = $6,125

Therefore, Woody Corp's pretax accounting income was $6,125.