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    Computaton of Taxable Income

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    Computation of taxable income.
    The records for Mal Co. show this data for 2008:

    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 $2,900.
    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 Orkin may deduct 14% for 2008.
    Interest received on tax exempt Iowa State bonds was $6,000.
    The estimated warranty liability related to 2008 sales was $19,600. Repair costs under warranties during 2008 were $13,600. The remainder will be incurred in 2009.
    Pretax financial income is $700,000. The tax rate is 30%.

    Instructions

    a) Prepare a schedule starting with pretax financial income and compute taxable income

    b) Prepare the journal entry to record income taxes for 2008.

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    https://brainmass.com/business/accounting/computaton-of-taxable-income-267211

    Solution Summary

    The solution explains how to calculate the taxable income

    $2.19

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