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A company facing a 45% tax rate has calculated its taxable income for the year to be $2,1

 A company facing a 45% tax rate has calculated its taxable income for the year to be $2,100,000. It made installment payments during the year totalling $995,000; this amount has been recorded in an asset account as "income tax installments"

 

Requirement:

Prepare the journal entry to record the adjusting entry for income taxes at the end of the year under the taxes payable method.

 

36) SEG Company reported $490,000 in income tax expense for the year under the accrual method. Its balance sheet reported an overall increase in deferred income tax liability of $20,000 and a decrease in income tax payable of $25,000. How much would SEG report as income tax expense had it used the taxes payable method?

37) Withering Inc. began operations in 2011. Due to the untimely death of its founder, Edwin Delaney, the company was wound up in 2013. The following table provides information on Withering's income over the three years.

 

 

2011

2012

2013

Income before tax

5,000

95,000

87,000

Taxable income

nil

90,000

97,000

 

The statutory income tax rate remained at 45% throughout the three years.

 

Requirement:

a. For each year and for the three years combined, compute the following:

- income tax expense under the taxes payable method;

- the effective tax rate (= tax expense -;- pre-tax income) under the taxes payable method;

- income tax expense under the accrual method;

- effective tax rate under the accrual method.

b. Briefly comment on any differences between the effective tax rates and the statutory rate of 45%.

Dec 12 2019 View more View Less

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