Calculation of Taxable Income

Essay

Calculation of taxable income
The records for Kalman Inc. show the following data for calendar 2020:
1. Gross profit on instalment sales recorded on the books was $ 100,000. Gross profit from collections of instalment receivables was $ 50,000.
2. Golf club dues were $ 3,800.
3. Machinery was acquired in January 2020 for $ 300,000. Kalman uses straight-line depreciation over a ten-year life (no residual value). For tax purposes, Kalman uses CCA at 14% for 2020 after considering the half-year rule.
4. Dividends received from a Canadian corporation were $ 4,000.
5. The estimated warranty liability related to 2020 sales was $ 19,600. Warranty repair costs paid during 2020 were $ 13,600. The remainder will be paid in 2021.
6. Pre-tax accounting income is $ 250,000. The enacted income tax rate is 25%.
Instructions
a) Prepare a schedule (starting with pre-tax accounting income) to calculate taxable income.
b) Prepare the required adjusting journal entries to record income taxes for 2020.