Calculation of Taxable Income

question 65

Essay

Calculation of taxable income
The records for Kalman Inc. show the following data for calendar 2020:
1. Gross profit on instalment sales recorded on the books was $ 100,000. Gross profit from collections of instalment receivables was $ 50,000.
2. Golf club dues were $ 3,800.
3. Machinery was acquired in January 2020 for $ 300,000. Kalman uses straight-line depreciation over a ten-year life (no residual value). For tax purposes, Kalman uses CCA at 14% for 2020 after considering the half-year rule.
4. Dividends received from a Canadian corporation were $ 4,000.
5. The estimated warranty liability related to 2020 sales was $ 19,600. Warranty repair costs paid during 2020 were $ 13,600. The remainder will be paid in 2021.
6. Pre-tax accounting income is $ 250,000. The enacted income tax rate is 25%.
Instructions
a) Prepare a schedule (starting with pre-tax accounting income) to calculate taxable income.
b) Prepare the required adjusting journal entries to record income taxes for 2020.

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Definitions:

Brain Activity

Neurological functions and processes occurring in the brain, detectable by various imaging techniques.

Electroencephalogram

A test that measures electrical activity in the brain using small, metal discs attached to the scalp, used to diagnose neurological disorders.

Brain Waves

Patterns of electrical activity in the brain, often categorized into beta, alpha, theta, and delta waves, which reflect different states of consciousness.

SQUID

A device used in physics and medical imaging that measures extremely subtle magnetic fields, short for Superconducting Quantum Interference Device.