The records for Ehrlich Co. show this data for 2021: Accrued revenue recorded on the books was $480,000. Revenue cash collections was $320,000. Life insurance on officers was $2,800. Fine for pollution violation was $1,000. 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 Ehrlich may deduct 15% for 2021. Interest received on tax exempt Florida State bonds was $9,000. The estimated warranty liability related to 2021 sales was $23,000. Repair costs under warranties during 2021 were $12,000. Pretax financial income is $700,000. The tax rate is 25% for this and future years. Instructions (a) Prepare a schedule starting with pretax financial income and compute taxable income. (b) Prepare the journal entry to record income taxes for 2021. (c ) Show the income statement presentation of income tax expense, starting with "income before tax"
The records for Ehrlich Co. show this data for 2021: Accrued revenue recorded on the books was $480,000. Revenue cash collections was $320,000. Life insurance on officers was $2,800. Fine for pollution violation was $1,000. 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 Ehrlich may deduct 15% for 2021. Interest received on tax exempt Florida State bonds was $9,000. The estimated warranty liability related to 2021 sales was $23,000. Repair costs under warranties during 2021 were $12,000. Pretax financial income is $700,000. The tax rate is 25% for this and future years. Instructions (a) Prepare a schedule starting with pretax financial income and compute taxable income. (b) Prepare the journal entry to record income taxes for 2021. (c ) Show the income statement presentation of income tax expense, starting with "income before tax"
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges
Section: Chapter Questions
Problem 1BD
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Question
14)
The records for Ehrlich Co. show this data for 2021:
- Accrued revenue recorded on the books was $480,000. Revenue cash collections was $320,000.
- Life insurance on officers was $2,800.
- Fine for pollution violation was $1,000.
- 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 Ehrlich may deduct 15% for 2021. - Interest received on tax exempt Florida State bonds was $9,000.
- The estimated warranty liability related to 2021 sales was $23,000. Repair costs under warranties during 2021 were $12,000.
- Pretax financial income is $700,000. The tax rate is 25% for this and future years.
Instructions
(a) Prepare a schedule starting with pretax financial income and compute taxable income.
(b) Prepare the
(c ) Show the income statement presentation of income tax expense, starting with "income before tax"
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