12.The records for Ivanhoe Co. show this data for 2021:● Gross profit on installment sales recorded on the books was $350,000. Gross profit from collections of installment receivables was $210,000.● Life insurance on officers was $3,100.● Machinery was acquired in January for $230,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Ivanhoe may deduct 14% for 2021.● Interest received on tax exempt Iowa State bonds was $8,300.● The estimated warranty liability related to 2021 sales was $20,900. Repair costs under warranties during 2021 were $12,900. The remainder will be incurred in 2022.● Pretax financial income is $530,000. The tax rate is 20%.(a) Prepare a schedule starting with pretax financial income and compute taxable income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Schedule of Pretax Financial Incomeand Taxable Income for 2021 $ $ Save for Later Attempts: 0 of 1 usedSubmit Answer (b)The parts of this question must be completed in order. This part will be available when you complete the part above.

Answered: Prepare a schedule starting with pretax…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter12: Corporations: Organization, Capital Structure, And Operating Rules

Section: Chapter Questions

Problem 42P

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12.

The records for Ivanhoe Co. show this data for 2021:

●		Gross profit on installment sales recorded on the books was $350,000. Gross profit from collections of installment receivables was $210,000.
●		Life insurance on officers was $3,100.
●		Machinery was acquired in January for $230,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Ivanhoe may deduct 14% for 2021.
●		Interest received on tax exempt Iowa State bonds was $8,300.
●		The estimated warranty liability related to 2021 sales was $20,900. Repair costs under warranties during 2021 were $12,900. The remainder will be incurred in 2022.
●		Pretax financial income is $530,000. The tax rate is 20%.

(a)

Prepare a schedule starting with pretax financial income and compute taxable income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Schedule of Pretax Financial Income and Taxable Income for 2021
		$








		$

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(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

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Pretax financial income is the income which the company has earned during the year before the income tax expenses are deducted from it. While as, there may exists the difference between the pretax financial income and taxable income of the same period is because that there may exists certain income which are exempted from the tax but which has been added as income in the financial income so it must be deducted from the financial income in order to derive the taxable income.

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