Interest received on tax exempt Iowa State bonds was $ 8,000. The Company paid $1,000 to obtain the bonds.

A machine was bought in Jan for $520,000. Straight-line depreciation over a 10 year life (no salvage value) is used. MACRS depreciation is used for tax. the company may deduct 14% of the cost for 2000 and 20% in 2001 untill fully depreciated.

The estimated bad debt expense related to 2000 was $12,000, while bad debt expense would have been $7000 under the direct write-off method.

Pretax financial income in 2000 was $800,000. The current tax rate is 30%.

Assume enacted tax rate of 35% for 2001 and 40% in 2002 and beyond.

1. Prepare a schedule starting with pretax financial income and compute taxable income for 2000.

2. Prepare the journal entry to record income taxes for 2000. Book deferred tax assets and deferred tax liabilities as separate line items.