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    Computation of Taxable Income for Bosch Co.

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    Computation of taxable income.

    The records for Bosch Co. show this data for 2011:

    - Gross profit on installment sales recorded on the books was $360,000. Gross profit from collections of installment receivables was $270,000.
    - Life insurance on officers was $3,800.
    - Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2011.
    - Interest received on tax exempt Iowa State bonds was $9,000.
    - The estimated warranty liability related to 2011 sales was $19,600. Repair costs under warranties during 2011 were $13,600. The remainder will be incurred in 2012.
    - Pretax financial income is $600,000. The tax rate is 30%.

    (a) Prepare a schedule starting with pretax financial income and compute taxable income.
    (b) Prepare the journal entry to record income taxes for 2011.

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    Solution Preview

    (a) Pretax financial income $600,000
    Permanent differences
    Life insurance 3,800
    Tax-exempt interest (9,000)
    Temporary ...

    Solution Summary

    The solution provides detailed explanations and calculations for the problem, including a schedule with pretax financial income and taxable income, and journal entries to record the income taxes during 2011.