S- You note during the review of sales, that a rebate was issued for the 2018 In
ID: 2432218 • Letter: S
Question
S- You note during the review of sales, that a rebate was issued for the 2018 Income Tax Game to encourage sales. 24,500 games were sold. Customers can mail in their receipt and receive a $1 rebate per game. It is estimated that 48% of customers will send in the rebate. The rebate expires on January 31, 2019. To date, 12,800 rebates have been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $12,800. The management of Czar would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.
T- Czar has a straight tax rate of 30%. Income tax expense is Net Income before taxes times 30%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)
Czar Incorporated End of Period Worksheet For the Year Ended December 31, 2018 Unadjusted Adjusted Account Title Trial Balance Adjustments Trial Balance DR CR DR CR DR CR Cash 264,000 - Accounts Receivable 555,984 - Allowance for Doubtful Accounts - 13,600 Interest Receivable - - Merchandise Inventory 340,000 - Prepaid Insurance - - LIFO Reserve - 25,600 Prepaid Advertising - - Prepaid Rent 13,600 - Office Supplies 4,800 - Note Receivable 20,000 Available for Sale Securities 300,000 - Office Building 3,000,000 - Accumulated Depreciation - Office Building - 70,000 Storage Building 1,020,000 - Accumulated Depreciation - Storage Building - - Land 600,000 - Leasehold Improvements 180,000 - Accumulated Depreciation - Leasehold Improvements - - Office Equipment 260,000 - Accumulated Depreciation - Office Equipment - 52,000 Patent 120,000 - Accounts Payable - 276,000 Sales Tax Payable - - Salaries Payable - 113,600 Payroll Taxes Payable - 20,000 Interest Payable - - Income Tax Payable - - Unearned Rent Revenue - - Loan Payable - First Trust - 520,000 Loan Payable - Coldwell Bank - 1,600,000 Common Stock - 520,000 Additional Paid in Capital - 1,599,000 Retained Earnings - 736,000 Accumulated Other Comprehensive Income - 20,000 Dividends 67,800 - Sales - 3,622,560 Sales Returns and Allowances 33,800 - Sales Discounts 15,400 - Cost of Goods Sold 1,583,600 - Sales Salaries Expense 349,120 - Office Salaries Expense 219,200 - Advertising Expense 12,800 - Depreciation Expense - Office Building - Depreciation Expense - Leasehold Improvements - - Depreciation Expense - Office Equipment - - Leasing Expense - Stores 105,600 - Miscellaneous Selling Expense 18400 - Research & Development Expense 12,000 Rent Expense - Storage Facility - - Insurance Expense 12,000 - Office Supplies Expense 28,000 - Miscellaneous Administrative Expense 7,336 - Rent Revenue - 60,000 Interest Revenue on Note Receivable - - Dividend Revenue on AFS Securities - 20,000 Interest Expense - - Bad Debt Expense 28,000 - Amortization Expense - - Income Tax Expense - - Payroll Taxes Expense 96,920 - Rebate Expense - - Unrealized holding loss - - Depreciation Expense-Storage Building - - Loss on Impairment - - Rebate Liability - - Restricted Cash for Future Expansion - - 9,268,360 9,268,360Explanation / Answer
Income Statement Revenue Sales $ 36,22,560 Rent revenue $ 60,000 Dividend received $ 20,000 Total revenue $ 37,02,560 Expenses Sales return and allowances $ 33,800 Sales Discount $ 15,400 Cost of goods sold $ 15,83,600 Sales salaries expenses $ 3,49,120 Office salalries expenses $ 2,19,200 Advertising expenses $ 12,800 Leasing expenses - stores $ 1,05,600 Rebat Expenses $ 12,800 Miscellenious selling expenses $ 5,600 Research & development expenses $ 12,000 insurance expenses $ 12,000 office supplies expenses $ 28,000 Misecellenious administrative expenses $ 7,336 Bad debts expenses $ 28,000 payroll taxes expenses $ 96,920 Total expenses $ 25,22,176 Profit before tax $ 11,80,384 Tax expenses @ 30% $ 3,54,115 Net income $ 8,26,269 Income tax expense $ 3,54,115 To Income tax payable $ 3,54,115 (Being income tax expense recorded)
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