Solution-Prepare the journal entry to record income tax

Prepare the journal entry to record income tax expense

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Reference no: EM132944216

The accounting records of Bonita Inc. show the following data for 2017 (its first year of operations).

Life insurance expense on officers was $11,000.
Equipment was acquired in early January for $298,000. Straight-line depreciation over a 5-year life is used, with no salvage value. For tax purposes, Bonita used a 30% rate to calculate depreciation.
Interest revenue on State of Iowa bonds totaled $4,000.
Product warranties were estimated to be $52,000 in 2017. Actual repair and labor costs related to the warranties in 2017 were $11,000. The remainder is estimated to be paid evenly in 2018 and 2019.
Pretax financial income was $896,000. The tax rate is 30%.

Problem (1) Assume that in 2018 Bonita reported a pretax operating loss of $970,000. There were no other temporary or permanent differences in tax and book income for 2018. Prepare the journal entry to record income tax expense for 2018. Bonita expects to return to profitability in 2019.

Reference no: EM132944216

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Prepare the journal entry to record income tax expense

Reference no: EM132944216

Reference no: EM132944216

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