Winter Corporation's taxable income is $500,000.In addition,Winter has the following items: $$\begin{array} { | l | r | }
\hline \text { Depreciation for tax purposes } & \$ 60,000 \
\hline \text { Depreciation for financial accounting purposes } & 40,000 \
\hline \text { Net capital loss } & ( 2,000 ) \
\hline \text { Interest on loan to acquire tax-exempt securities } & 7,000 \
\hline
\end{array}$$ What is Winter's financial accounting income?

Question

Winter Corporation's taxable income is $500,000.In addition,Winter has the following items: $$\begin{array} { | l | r | } 
\hline \text { Depreciation for tax purposes } & \$ 60,000 \
\hline \text { Depreciation for financial accounting purposes } & 40,000 \
\hline \text { Net capital loss } & ( 2,000 ) \
\hline \text { Interest on loan to acquire tax-exempt securities } & 7,000 \
\hline
\end{array}$$ What is Winter's financial accounting income?

Quizplus · Accepted Answer

Financial accounting income is taxable income plus permanent differences and minus temporary differences. In this case, the permanent difference is the difference between depreciation for tax purposes and depreciation for financial accounting purposes, which is $60,000 - $40,000 = $20,000. The temporary difference is the net capital loss, which is not deductible for tax purposes but is deductible for financial accounting purposes. Therefore, Winter's financial accounting income is $500,000 + $20,000 - $2,000 = $518,000.

Winter Corporation's Taxable Income Is $500,000 What Is Winter's Financial Accounting Income? A)$511,000 B)$513,000 C)$518,000 D)$520,000

Winter Corporation's Taxable Income Is $500,000 What Is Winter's Financial Accounting Income?
A)$511,000
B)$513,000
C)$518,000
D)$520,000