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Computation of Taxable Income for Bosch Co.

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.