Question:
Computation of taxable income.
The records for Bosch Co. show this data for 2015:
Gross profit on installment sales recorded on the books was $420,000. Gross profit from collections of installment receivables was $280,000.
Life insurance on officers was $3,800.
Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2015.
Interest received on tax exempt Iowa State bonds was $9,000.
The estimated warranty liability related to 2015 sales was $21,600. Repair costs under warranties during 2015 were $13,600. The remainder will be incurred in 2016.
Pretax financial income is $600,000. The tax rate is 30%.
Instructions
(a) Prepare a schedule starting with pretax financial income and compute taxable income.
(b) Prepare the journal entry to record income taxes for 2015.