Tungsten Corporation, a Calendar Year Cash Basis Taxpayer, Made Estimated

question 10

Multiple Choice

Tungsten Corporation, a calendar year cash basis taxpayer, made estimated tax payments of $800 each quarter in 2018, for a total of $3,200. Tungsten filed its 2018 tax return in 2019 and the return showed a tax liability $4,200. At the time of filing, March 15, 2019, Tungsten paid an additional $1,000 in Federal income taxes. How does the additional payment of $1,000 impact Tungsten's E & P?

• A) Increase by $1,000 in 2018.
• B) Increase by $1,000 in 2019.
• C) Decrease by $1,000 in 2018.
• D) Decrease by $1,000 in 2019.
• E) None of the above.

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Definitions:

High-Low Method

An accounting technique used to estimate fixed and variable costs based on the highest and lowest levels of activity.

Maintenance Cost

The expenses incurred for keeping assets in their original operating condition without enhancing their capacity or efficiency.

Cost Formula

This is an equation used to predict the total costs associated with producing a certain number of units or providing a certain level of service.

Variable Costs

Expenses that vary directly with changes in production volume, including costs like raw materials and some labor expenses.