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Accounting

The records for Orkin Co. show this data for 2008:

• Gross profit on installment sales recorded on the books was $360,000. Gross profit from collections of installment receivables was $270,000.

• 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 Orkin may deduct 14% for 2008.

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

• The estimated warranty liability related to 2008 sales was $19,600. Repair costs under warranties during 2008 were $13,600. The remainder will be incurred in 2009.

• Pretax financial income is $600,000. The tax rate is 30%.

Instructions:

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

(b) Prepare the journal entry to record income taxes for 2008.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M957626

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