89 rehobeth company 39 s taxable income and other financial data for 2016 are presen 4313616

89 rehobeth company 39 s taxable income and other financial data for 2016 are presen 4313616

89.Rehobeth Company's taxable income and other financial data for 2016 are presented below:

Taxable income

$500,000

Interest received on municipal bonds

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

?

Required:

a.

Calculate Rehobeth Company's 2016 pretax financial income.

b.

For each item, explain why there is a difference, if any exists, between how it is treated for taxable income purposes and pretax financial income.

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