The Accent Corporation shows the following information. On January 1, 2012, Accent purchased a donut machine for $900,000.
A) Pretax financial income is $2,000,000 in 2012 and $2,500,000 in 2013.
B) Taxable income is expected in future years with an expected tax rate of 40%.
C) The company recognized an extraordinary gain of $250,000 in 2013 (which is fully taxable).
D) Tax-exempt municipal bonds yielded interest of $50,000 in 2013.
E) Straight-line basis for 8 years for financial reporting (See Appendix 11A.)
F) Half-year convention basis depreciation for 5 years for tax purposes.
Required:
1) Compute taxable income and income taxes payable for 2013.
2) Prepare the journal entries for income tax expenditure.