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Compute taxable income and income taxes payable

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Reference no: EM131811333

Question - The Ambrosia Corporation's lead accountant shows the following information.

On Jan. 1, 2012, Ambrosia purchased a bottling machine for $3,000,000.

A) Straight-line basis depreciation for 3 years for tax purposes.

B) Half-year convention for 5 years for financial reporting (See Appendix 11A).

C) Tax-exempt municipal bonds yielded interest of $50,000 in 2013.

D) Pretax financial income is $3,000,000 in 2012 and $4,400,000 in 2013.

E) The company recognized an extraordinary gain of $250,000 in 2013 (which is fully taxable).

F) Taxable income is expected in future years with an expected tax rate of 40%.

Required:

1) Compute taxable income and income taxes payable for 2013.

2) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013.

3) Prepare the deferred income taxes presentation for Dec 31, 2013 balance sheet.

Required:

a) Prepare journal entries for the end of the year based on the information above.

b) Prepare the entry to record the gross profit realized in the current year.

Reference no: EM131811333

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