Question - The records for Orkin Co. show this data for 2012:
• Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, accelerated depreciation is used and Orkin may deduct 14% for 2012.
• Interest received on tax exempt Iowa State bonds was $9,000.
• The estimated warranty liability related to 2012 sales was $19,600. Repair costs under warranties during 2012 were $13,600. The remainder will be incurred in 2013.
• Pretax financial income is $600,000 and taxable income is 585,000. The tax rate is 30%.
Instructions
(1) Calculation of deferred tax asset and liability at the end of 2012.
(2) Calculation of net deferred tax expense (benefit) for 2012.
(3) Calculation of income tax expense (benefit) for 2012.
(4) Journal entry to record income tax expense, deferred taxes, and income tax payable for 2012.