so that the entire year\'s tax expense is correct (i.e. the difference between t
ID: 2511758 • Letter: S
Question
so that the entire year's tax expense is correct (i.e. the difference between total income tax expense and the amount already accrued through November).
Income Statement
Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full on the return's March 15, 2017 due date. ABC's income tax rate is 35%. The entire year's income tax expense was estimated at the beginning of 2016 to be $108,000, so January through November income tax expense recognized amounts to $99,000 (11/12 months). Since we are assuming estimates are not made during the year, the balance in Income taxes payable represents income tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. Based on the income before income taxes figure from the income statement, calculate and record December's income tax expense adjustmentso that the entire year's tax expense is correct (i.e. the difference between total income tax expense and the amount already accrued through November).
Income Statement
ABC Corporation Income Statement For the Year Ended December 31, 2016 Sales Revenue 790,000 Less: Cost of goods sold $ (107,000) Gross Margin 683,000 Operating Expense: Advertising Expense 9,240 Bad debt expense $ 75,000 Depreciation expense 11,165 Impairment loss expense 5,000 Insurance expense 22,500 Office expense 28,500 Utilities expense 33,571 Wages expense 66,150 Loss on reduction of inventory to NRV 16,000 Total operating expense (267,126) Operating Income 415,874 Other income/expense: Rent Revenue 4,500 Interest Expense (31,171) (26,671) Income before taxes 389,203 less: income tax expense (99,000) Net income $ 290,203Explanation / Answer
Income before taxes as per income statement 389203 Income tax @35% 136221 Income tax accounted upto Nov.30 99000 Balance to be accounted 37221 Entry to record the correct income tax for the year Date Account Title Debit Credit Dec.31,2016 Income Tax Expense 37221 Income Tax payable 37221
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.