Computation of taxable income. The records for Bosch Co. show this data for 2018: · Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000. 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 2018. Interest received on tax exempt Iowa State bonds was $9,000. The estimated warranty liability related to 2018 sales was $21,600. Repair costs under warranties during 2018 were $13,600. The remainder will be incurred in 2019. 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 2018.
Computation of taxable income. The records for Bosch Co. show this data for 2018: · Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000. 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 2018. Interest received on tax exempt Iowa State bonds was $9,000. The estimated warranty liability related to 2018 sales was $21,600. Repair costs under warranties during 2018 were $13,600. The remainder will be incurred in 2019. 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 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Computation of taxable income.
The records for Bosch Co. show this data for 2018:
· Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000.
- 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 2018. - Interest received on tax exempt Iowa State bonds was $9,000.
- The estimated warranty liability related to 2018 sales was $21,600. Repair costs under warranties during 2018 were $13,600. The remainder will be incurred in 2019.
- 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
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