New Wave Co. sold 18,500 annual subscriptions of Game Life for $58 during Decemb
ID: 2471499 • Letter: N
Question
New Wave Co. sold 18,500 annual subscriptions of Game Life for $58 during December 2014. These new subscribers will receive monthly issues, beginning in January 2015. In addition, the business had taxable income of $676,000 during the first calendar quarter of 2015. The federal tax rate is 35%. A quarterly tax payment will be made on April 7, 2015.
Prepare the Current Liabilities section of the balance sheet for New Wave Co. on March 31, 2015.
current liabilities: federal income taxes payable ?? advances on magazine subscriptions ?? total curent liabilities ??Explanation / Answer
Current liabilities
Federal income tax payable (676,000 × 35%)
$236,600
Advances on magazine subscriptions (18,500 × $58 × ¾)
$804,750
Total
$1,041,350
Note: Advances should be multiplied by 3/4 , since out of 4 quarter in a year 1 had gone (till 31st March) and 3 are left.
Federal income tax payable (676,000 × 35%)
$236,600
Advances on magazine subscriptions (18,500 × $58 × ¾)
$804,750
Total
$1,041,350
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