For the year ended December 31, 2011, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2011 from Fidelity's records follows:
Interest income on municipal bonds $ 32,000
Depreciation claimed on the 2011 tax return in excess of depreciation on the income statement 55,000
Carrying amount of depreciable assets in excess of their tax basis at year-end 85,000
Warranty expense reported on the income statement 26,000
Actual warranty expenditures in 2011 16,000
Fidelity's income tax rate is 40%. At January 1, 2011, Fidelity's records indicated balances of zero and $12,000 in its deferred tax asset and deferred tax liability accounts, respectively.
Required:
(1) Determine the amounts necessary to record income taxes for 2011 and prepare the appropriate journal entry. (Enter your answers in thousands. Omit the "tiny_mce_markerquot; sign in your response.)
(2) What is Fidelity's 2011 net income? (Enter your answer in thousands. Omit the "tiny_mce_markerquot; sign in your response.)