Question

Please use the relevant knowledge of intermediate financial accounting to help me solve this problem

Stubfoot Co.'s accounting team has determined that income before taxes for 2022 will be $229,000, a huge improvement over the $91,600 that the company reported in 2021. The calculation of their 2022 income before taxes includes $1,400 in tax-exempt municipal bond interest and a life insurance payout of $105,000. It also includes $23,000 in rent revenue, $61,000 in depreciation, and $20,152 in warranty expense. What is the company's taxable income for the current year?

Answer 1

The company's taxable income for the current year is $18,448.

To calculate the company's taxable income for the current year, we need to subtract the tax-exempt municipal bond interest and the life insurance payout from the income before taxes. We also need to subtract the rent revenue, depreciation, and warranty expense.

• Income before taxes: $229,000
• Tax-exempt municipal bond interest: $1,400
• Life insurance payout: $105,000
• Rent revenue: $23,000
• Depreciation: $61,000
• Warranty expense: $20,152

Taxable income = Income before taxes - Tax-exempt municipal bond interest - Life insurance payout - Rent revenue - Depreciation - Warranty expense.

Taxable income = $229,000 - $1,400 - $105,000 - $23,000 - $61,000 - $20,152.

Taxable income = $18,448.