Prepare a schedule starting with pretax financial income and compute taxable income.
Prepare a schedule starting with pretax financial income and compute taxable income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
12.
The records for Ivanhoe Co. show this data for 2021:
| ● | Gross profit on installment sales recorded on the books was $350,000. Gross profit from collections of installment receivables was $210,000. | |
| ● | Life insurance on officers was $3,100. | |
| ● | Machinery was acquired in January for $230,000. Straight-line |
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| ● | Interest received on tax exempt Iowa State bonds was $8,300. | |
| ● | The estimated warranty liability related to 2021 sales was $20,900. Repair costs under warranties during 2021 were $12,900. The remainder will be incurred in 2022. | |
| ● | Pretax financial income is $530,000. The tax rate is 20%. |
(a)
Prepare a schedule starting with pretax financial income and compute taxable income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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Schedule of Pretax Financial Income
and Taxable Income for 2021 |
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$
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(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.Expert Solution
Step 1
Pretax financial income is the income which the company has earned during the year before the income tax expenses are deducted from it. While as, there may exists the difference between the pretax financial income and taxable income of the same period is because that there may exists certain income which are exempted from the tax but which has been added as income in the financial income so it must be deducted from the financial income in order to derive the taxable income.
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