The accounting records of Concord Inc. show the following data for 2020 (its first year of operations). 1. Life insurance expense on officers was $9,300. 2. Equipment was acquired in early January for $277,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Concord used a 30% rate to calculate depreciation. 3. Interest revenue on State of New York bonds totaled $4,300. 4. Product warranties were estimated to be $48,500 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,000. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Gross profit on an accrual basis was $103,000. For tax purposes, $69,100 was recorded on the installment-sales method. 6. Fines incurred for pollution violations were $4,500. 7. Pretax financial income was $793,300. The tax rate is 30%.
The accounting records of Concord Inc. show the following data for 2020 (its first year of operations). 1. Life insurance expense on officers was $9,300. 2. Equipment was acquired in early January for $277,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Concord used a 30% rate to calculate depreciation. 3. Interest revenue on State of New York bonds totaled $4,300. 4. Product warranties were estimated to be $48,500 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,000. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Gross profit on an accrual basis was $103,000. For tax purposes, $69,100 was recorded on the installment-sales method. 6. Fines incurred for pollution violations were $4,500. 7. Pretax financial income was $793,300. The tax rate is 30%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The accounting records of Concord Inc. show the following data for 2020 (its first year of operations).
| 1. | Life insurance expense on officers was $9,300. | |
| 2. | Equipment was acquired in early January for $277,000. Straight-line |
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| 3. | Interest revenue on State of New York bonds totaled $4,300. | |
| 4. | Product warranties were estimated to be $48,500 in 2020. Actual repair and labor costs related to the warranties in 2020 were $9,000. The remainder is estimated to be paid evenly in 2021 and 2022. | |
| 5. | Gross profit on an accrual basis was $103,000. For tax purposes, $69,100 was recorded on the installment-sales method. | |
| 6. | Fines incurred for pollution violations were $4,500. | |
| 7. | Pretax financial income was $793,300. The tax rate is 30%. |
(a)
Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020.
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Schedule of Pretax Financial Income
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(b)
Prepare the journal entry for 2020 to record income taxes payable, income tax expense, and deferred income taxes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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Account Titles and Explanation
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Debit
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