Schedule of taxable income and journal entries

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Reference no: EM1355996

Computation of taxable income.

The records for Frish Co. show this data for 2011:

Gross profit on installment sales recorded on the books was $360,000. Gross profit from collections of installment receivables was $270,000.
Life insurance on officers was $2,900.
Machinery was acquired in January for $300,000. Straight-line depreciation over a 10-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Frish may deduct 14% for 2011.
Interest received on tax exempt Iowa State bonds was $6,000.
The estimated warranty liability related to 2008 sales was $19,600. Repair costs under warranties during 2011 were $13,600. The remainder will be incurred in 2012.
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 2011.

Reference no: EM1355996

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