Compute taxable income, Taxation

Kline Company, an accrual basis calendar year corporation, reported $560,000 net income before tax on its financial statements prepared in accordance with GAAP for 2011. Kline's records reveal the following information: (Kline's MTR is 35%. and all items have been properly reported under GAAP).

            . The allowance for bad debts as of January 1, 2011 was $80,000. Write-offs for the year totaled $40,000, and the addition to the allowance for the year was $35,000. The allowance as of December 31 was $75,000.

            . Kline paid a $65,000 fine to the state of Delaware for a violation of state pollution control laws.

            . Kline's lawyers established an estimated fund for a pending lawsuit, which they expect to cost the company $125,000. This liability meets the fixed and determinable standard relating to contingent liabilities. under GAAP

            . Kline received $85,000 in Municipal Bond interest that is not taxable.

            Kline had tax depreciation of $89,000 and book depreciation of $74,000   

Compute Kline's taxable income, and prepare the required journal entry to record the tax expense, tax payable and deferred account, if any.

Posted Date: 2/15/2013 12:59:05 AM | Location : United States

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