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%.
a) Prepare a schedule starting with pretax financial income and compute taxable income
b) Prepare the journal entry to record income taxes for 2008.
The solution explains how to calculate the taxable income