Explore BrainMass

Computaton of Taxable Income

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%.


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

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

Solution Summary

The solution explains how to calculate the taxable income