On the Worksheet for the Current Year Ended Dec 31

question 58

Essay

On the worksheet for the current year ended Dec 31, column totals in the Income Statement section are debit, $220,000 and credit $285,000. Assume that the income and deductions for tax purposes are the same as those for financial reporting and that the company paid estimated taxes of $15,000 to date. Tax rates remain 15% for the first $50,000; 25% on the next 25,000; 34% on the next
$25,000 and 39% on the excess over $100,000. Prepare the adjusting entry for income taxes.

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Definitions:

Conditional Sale Contract

A contract for the sale of goods where the payment of the price, or part of it, is deferred and the full ownership of the goods does not transfer until certain conditions, typically the full payment, are met.

Rate of Return

The gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost.

Compounded Semi-annually

A method of calculating interest where the interest is added to the principal twice a year, resulting in interest being earned on interest.

Compounded Semi-annually

Denotes the method of applying interest to a principal sum at mid-year and end of the year.