At the End of Its First Year of Operations on December

question 93

Essay

At the end of its first year of operations on December 31, 2014, the Mojave Company reported pretax financial income of $100,000. An investigation of that income revealed the following items:
•Bad debts expense of $12,000 was recognized. The accounts will be written off in 2015.
•Installment sales of $50,000 were recognized in financial income. These sales were accounted for by the installment sales method for income tax purposes. Only $20,000 was reported on the tax return.
•Warranty expenses of $16,000 were accrued for financial reporting purposes, but were not expected to result in a cash payment until 2015.
•Depreciation on the tax return exceeded depreciation for financial reporting purposes by $32,000.
Assume that any deferred tax assets are considered more likely than not to be realized. The enacted income tax rate for all years is 25%.
Required:
a.Compute taxable income.
b.Prepare the entry to record income tax expense and any related assets and liabilities for Mojave on December 31, 2014.

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Definitions:

Sociology

The study of societies, their interactions, and the processes that preserve and change them.

Collective Conscious

The set of shared beliefs, ideas, and moral attitudes that operate as a unifying force within society.

Mechanical Societies

Societies characterized by simple divisions of labor and a strong sense of community and conformity, as described by sociologist Émile Durkheim.

Organic Societies

Societies characterized by complex differentiation and interdependence among its components, analogous to the organs of a living organism, often contrasted with simpler, more "mechanical" formations.