Blanco Engineering reported pretax accounting income of $977,000 for the year ended December 31, 2016. The following information has been taken from Blanco’s accounting records.
During 2016
1. Blanco was fined by the EPA in 2016 for environmental pollution of $32000
2.Depreciation claimed on the 2016 tax return in excess of their depreciation on the income statement $55000
3. Carrying amount of depreciable assets in excess of their tax basis at year-end $85,000
4. Warranty expense reported on the income statement $26,000
5. Actual warranty expenditures in 2016 $16,000
Blanco’s income tax rate is 40%. At January 1, 2016, Blanco’s records indicated balances of zero in Deferred tax assets and $12,000 in the deferred tax liability account.

  1. Reconcile financial income for 2016 to taxable income.
  2. Prepare the journal entry to record the appropriate journal entry for the 2016 tax expense.
  3. Present the bottom half of the income statement starting with Pretax Income.
  4. What is the effective tax rate?