Computation of Taxable Income $\bullet$ Gross Profit on Installment Sales Recorded on the Books Was

question 55

Essay

Computation of taxable income.The records for Bosch Co. show this data for 2015:
$\bullet$ Gross profit on installment sales recorded on the books was $420,000. Gross profit from collections of installment receivables was $280,000.
$\bullet$ Life insurance on officers was $3,800.
$\bullet$ Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2015.
$\bullet$ Interest received on tax exempt Iowa State bonds was $9,000.
$\bullet$ The estimated warranty liability related to 2015 sales was $21,600. Repair costs under warranties during 2015 were $13,600. The remainder will be incurred in 2016.
$\bullet$ Pretax financial income is $600,000. 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 2015.

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Definitions:

Output

The total amount of goods or services produced by a company or country.

TVC

Total Variable Cost, the sum of all variable costs (costs that vary with production volume) associated with producing a specific quantity of a good or service.

Output

The total amount of goods or services produced by a company, industry, or economic system.