(L.0BJ. 8) Computing and recording a corporation’s income tax [1 5—20 min]
The accounting records of Restore Redwood Corporation provide income statement data for 2011.
Total expenses include depreciation of $56,000 computed on the straight-line method. In calculating taxable income on the tax return, Restore Redwood uses the modified accelerated cost recovery system (MACRS). MACRS depreciation was $81,000 for 2011. The corporate income tax rate is 40%.
Requirements
1. Compute taxable income for the year. For this computation, substitute MACRS depreciation in place of straight-line depreciation.
2. Journalize the corporation's income tax for 2011.
3. Show how to report the two income tax liabilities on Restore’s classified balance sheet.
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