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 depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Ivanhoe may deduct 14% for 2021. ● 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%.
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 depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Ivanhoe may deduct 14% for 2021. ● 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%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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
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