Quiz chap19 - • Pretax financial income is $800,000 The...

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Quiz Chapter 19 Accounting 3312 Spring 2011 Name: __________________________ The records for Bosch Co. show this data for 2011: Gross profit on installment sales recorded on the books was $400,000. Gross profit from collections of installment receivables was $280,000. Life insurance on officers was $3,500.(not deductible for tax purposes) Machinery was acquired in January for $350,000. Straight-line depreciation over a ten- year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 15% for 2011 Interest received on tax exempt Iowa State bonds was $10,000. The estimated warranty liability related to 2011 sales was $20,500. Repair costs under warranties during 2011 were $12,500. The remainder will be incurred in 2012.
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Unformatted text preview: • Pretax financial income is $800,000. The tax rate is 40%. Instructions a) Prepare a schedule starting with pretax financial income and compute taxable income. b) Prepare the journal entry to record income taxes for 2011. Financial Income (GAAP) 800,000 Installment Contracts (120,000) temp F Taxable life insurance 3,500 perm Depreciation (17,500) temp F Taxable Tax exempt (10,000) perm Warranty Expense 8,000 temp F Deductible Taxable income(IRS) 664,000 Tax rate 40% taxes payable 265,600 Deferred Tax liability = (120000+17500)*40%=55000 Deferred Tax asset=8000*40%=3200 Tax expense 317400 Deferred tax asset 3200 Deferred tax liability 55000 Tax payable 265600...
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