Reference no: EM133185277
Question - The records for Dulcinea Co show this data for 2021:
i. $600,000 was collected from customers in 2021, but only $550,000 was earned according to GAAP.
ii. Life insurance premium paid on officers was $4,500 (Company is beneficiary).
iii. Machinery was acquired in January for $550,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Dulcinea may deduct 14% for 2020.
iv. Interest received on tax exempt Kansas State bonds was $12,000.
v. $70,000 was accrued as estimated litigation expenses. It will not be paid until the lawsuit is finalized.
vi. Pretax financial income is $700,000. The tax rate is 30%.
Required -
a. Prepare a schedule starting with pretax financial income and compute taxable income.
b. Prepare the journal entry to record Income Taxes for 2021.