The following information is provided: Income before taxes $900,000 Income before taxes included the following Requirements: Interest income of= $80,000 (from municipal bonds) Rental income was collected in advance in 2011 and earned in 2012 = $20,000 A piece of equipment was purchased in 2012. Depreciation per books = $40,000 and per income taxes $100,000. Warranty expense in 2012 was $20,000 but for tax purposed only $5,000 was deductible. Assume that at the beginning of 2012 deferred tax asset = $8,000 due to the rent mcome. Tax rate for 2012 and the foreseeable future is 40%.
a. Calculate taxable income
b. Make the necessary tax entry. (include the amounts for tax expense and deferred taxes.