Amazing Accountants (AA) opened business on January 1, 20X2. It uses straight li

Question

Amazing Accountants (AA) opened business on January 1, 20X2. It uses straight line depreciation for financial reporting purposes. No accounts were written off during 20X2. AA also took out a $1,000,000 life insurance policy on its owner/partner for a yearly premium of $1,200, whereby the company is the beneficiary of the policy. The following data applies to AA at year end and December 21, 20X2. Current Assets & Current Liabilities: Accounts Receivable: $20,000 Allow. For Doubt Accts: (1,000) Unearned Rev. (Retainers): 4,500 Property, Plant, Equip: Office Equipment Cost: $200,000 Accum Deprec. (Straight line) 20,000 Accum Deprec. (MACRS) 28,580 Other: Income Before Tax Per books at 12/31/X2: $250,000 Income Tax Rate: 30% 1.) Record the 12/31/X2 income tax journal entry. Complete the tax schedule leading up to the Journal Entries. Show Calculations. 2.) Complete Tax Schedule leading up to Journal Entry.

Explanation / Answer

Income before Tax $         250,000.00 Less: Insurance Premium $              1,200.00 Net Income before tax $         248,800.00 Income Tax @30% $           74,640.00 Account Title Debit Credit Income Tax $           74,640.00 Income Tax Payable $          74,640.00 Income Summary $           74,640.00 Income Tax $          74,640.00

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