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Prepare the journal entry to record income taxes

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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.

Reference no: EM133185277

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