The IRS Is Investigating Miller Productions' Tax Returns for 2017

question 43

Multiple Choice

The IRS is investigating Miller Productions' tax returns for 2017 and 2018. Based on the IRS audit procedures, the company accrued a $46,000 loss for additional tax assessments in 2018 for the 2017 tax year. At the end of 2018, Miller was able to settle with IRS for $68,000. What entry should Miller make when it pays the deficiency in December, 2018?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Income Taxes Payable } & 46,000 & \\
• \hline \text { Retained Earnings } & 22,000 & \\
• \hline \text { Cash } & & 68,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Income Taxes Payable } & 46,000 & \\
• \hline \text { Income Tax Expense } & 22,000 & \\
• \hline \text { Cash } & & 68,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Income Taxes Payable } & 46,000 & \\
• \hline \text { Retained Earnings } & & 22,000 \\
• \hline \text { Cash } & & 24,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | r | r | }
• \hline \text { Income Taxes Payable } & 68,000 & \\
• \hline \text { Cash } & & 68,000 \\
• \hline
• \end{array}\]

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Definitions:

Market Output

The total amount of goods or services produced and offered for sale by businesses in a particular market.

External Costs

Costs that are not borne by the producer or consumer of a good or service but by society, such as pollution.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where market supply and demand balance each other.