Kline Company, an accrual basis calendar year corporation, reported $560,000 net income before tax on its financial statements prepared in accordance with GAAP for 2012. Kline's records reveal the following information: (Kline's MTR is 35%. and all items have been properly reported under GAAP).
- The allowance for bad debts as of January 1, 2012 was $80,000. Write-offs for the year totaled $20,000, and the addition to the allowance for the year was $50,000. The allowance as of December 31 was $110,000.
- Kline paid $75,000 fine to the State of New Jersey for a violation of state pollution control laws.
- Klines lawyers established an estimated fund for a pending lawsuit, which they expect to cost the company $125,000. This liability meets the fixed and determinable standard relating to contingent liabilities under GAAP . Kline actually paid out $120,000 relating to this law suit in 2012.
- Kline received $45,000 in Municipal Bond interest that is not taxable.
- Kline had tax depreciation of $89,000 and book depreciation of $94,000
- Compute Kline's taxable income, and prepare the required journal entry to record the tax expense, tax payable and deferred account, if any.