Reference no: EM131003687

For the year ended December 31, 2011, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2011 from Fidelity's records follows:
Interest income on municipal bonds ............. $32,000
Depreciation claimed on the 2011 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 2011 ............ 16,000
Fidelity's income tax rate is 40%. At January 1, 2011, 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 2011 and prepare the appropriate journal entry.

2. What is Fidelity's 2011 net income?