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Prepare the journal entry to record income taxes

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Reference no: EM133041412

Question - The records for Bosch Co. show this data for 2021:

Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000.

Life insurance on officers was $3,800.

Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2021.

Interest received on tax-exempt Iowa State bonds was $9,000.

The estimated warranty liability related to 2021 sales was $21,600. Repair costs under warranties during 2021 were $13,600. The remainder will be incurred in 2022.

Pretax financial income is $700,000. The tax rate is 20%.

Required - Please explain and show work to demonstrate how you arrived at the answer you have given.

(a) Prepare a schedule starting with pretax financial income and compute taxable income.

(b) Prepare the journal entry to record income taxes for 2021.

Reference no: EM133041412

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