Current Uabilities New Wave Co. sold 17,500 annual subscriptions of Game Life fo

Question

Current Uabilities New Wave Co. sold 17,500 annual subscriptions of Game Life for $51 during December 2016. These new subsoribers will receive monthly issues, beginning in January 2017. In addition, the business had taxable income of $564,000 during the first calendar quarter of 2017 The federal tax rate is 38%. A quarterly tax payment will be made on April 7, 2017 Prepare the Current Liabilities section of the balance sheet for New Wave Co. on March 31. 2017 New Wave Co. Current Liabilities Section of Balance Sheet March 31, 2017 Current liabilities: Federal income taxes payable Advances on magazine subscriptions Total current liabilities PreviousNext

Explanation / Answer

17,500 x $51 = $892,500 current liability from sales subscriptions
892,500 x 9/12 = $669,375 current liability at March 31, 2017
564,000 x 38% = $214,320 current income tax liability

Current liabilities
Sales subscriptions liability . . $669,375
Income tax payable . . . . . . . . .214,320

Total current liabilities . . . . . . $883,695

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