Question - The following information is provided calculate taxable income:
Income before taxes=900,000
Income before taxes includes the following:
Interest income of $80,000 from municipal bonds.
Rental Income collected in advance in 2011 and earned in 2012=$20,000
A piece of equipment was purchased in 2012. Depreciated per books for $40,000 and per income taxes for $100,000.
Warranty expense in 2012 was $200,000 but for tax purposes only $6,000 was deductible.
Assume that at the beginning of 2012 deferred tax asset=$8,000 due to the rental income.
Tax rate for 2012 and foreseeable future is 30%.
Requirement:
A. Calculate taxable income
B. Make the necessary tax entry, including the amounts for tax expense and deferred taxes.