Question: For the year ended December 31, 2016, Fidelity Engineering reported pretax accounting income of $987,000. Selected information for 2016 from Fidelity's records follows:
Interest income on municipal bonds $ 34,000
Depreciation claimed on the 2016 tax return in excess of depreciation on the income statement 58,000
Carrying amount of depreciable assets in excess of their tax basis at year-end 90,000
Warranty expense reported on the income statement 27,500
Actual warranty expenditures in 2016 17,000
Fidelity's income tax rate is 40%. At January 1, 2016, Fidelity's records indicated balances of zero and $12,800 in its deferred tax asset and deferred tax liability accounts, respectively.
Required: 1. Determine the amounts necessary to record income taxes for 2016 and prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands rounded to two decimal places (i.e. 1,230 should be entered as 1.23).)
2. What is Fidelity's 2016 net income? (Enter your answer in thousands and round your answer to 2 decimal places.)