Using the worksheet completed in part IIIa, prepare a tax provision using the following information:   The bookkeeper never included deferred income…

Using the worksheet completed in part IIIa, prepare a tax provision using the following information:

• The bookkeeper never included deferred income taxes in the financial statements. 
• You believe that as a result of pending tax legislation, the current 40% income tax rate will be decreased for 2016 to 35% and you are uncertain which tax rate to apply in determining deferred taxes. 
• You remember that estimated costs are not deductible for tax purposes.
• The allowance for doubtful accounts is an estimate and the actual bad debt expense incurred for the year was only $125.
• Included on the trial balance is $200 of meals and entertainment expense.
• The rental equipment has a 7-year MACRS life for tax purposes.
• The intangibles should be amortized over 15 years for tax purposes.
• The trial balance includes $250 for a parking ticket.
• Tax law requires revenue for related party transactions to be recognized at fair value.
• You determine that due to the pending appeal on the lawsuit there is a need for a 30% valuation allowance.

1. Prepare a schedule detailing your computation of taxable income. (20 points)
2. Prepare the tax provision and the journal entries for income taxes. (20 points)
3. Post the income tax entry to your worksheet and submit your completed worksheet