Question
Rehobeth Company's pretax financial income and other financial data for 2016 are presented below: Pretax financial income $521,000 Interest received on municipal bonds (non-taxable) 75,000
Rehobeth Company's pretax financial income and other financial data for 2016 are presented below:
Pretax financial income $521,000
Interest received on municipal bonds (non-taxable) 75,000
Estimated bad debt expense (not written off) 40,000*
Cash expenditures for product warranty expenses 108,000
Product warranty expense for accounting purposes 142,000
Gross profit on installment sales for 2016 180,000
Gross profit recognized in 2016 for tax purposes
based on installment sales in 2016 160,000 *reported on income statement, but not on tax return.
Required:
1) Calculate Rehobeth Company's 2016 taxable income.
Pretax financial income $521,000
2) Prepare the income tax journal entry for December 31, 2016
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