For the year ended December 31, 2013, Fidelity Engineering reported pretax accounting income of $977,000.
Selected information for 2013 from Fidelity's records follows:
Interest income on municipal bonds $32,000
Depreciation claimed on the 2013 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 2013 16,000
Fidelity's income tax rate is 40%. At January 1, 2013, 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 2013 and prepare the appropriate journal entry.
2. What is Fidelity 's 2013 net income?