Question : 177. During its first four years of operations a company elected : 1234223

177. During its first four years of operations a company elected to use different methods for determining the amount of particular expenses for tax purposes and for reporting purposes, with the following results: 

 First Year      Second Year    Third Year     Fourth Year

Income before    

  income tax$20,000$50,000$62,100$  84,000

Taxable income6,00041,00057,500101,000

Assuming an income tax rate of 40%, determine (a) the amount of income tax reported on the income statement for each year, (b) the amount of income tax that would be paid each year, and (c) the deferred income tax payable that would be reported on the balance sheet at the end of each of the four years. 

178. On December 31, 2005, the tax accountants of Mega Sales inform the accountants that 70% of the current year’s tax expense should be considered payable on March 15, 2006. The balance will be payable on March 15, 2007. Mega Sales journalizes any taxes payable within the next calendar year to Income Tax Payable and taxes due after the next calendar year to the Deferred Income Tax Payable account. The accountants determine that taxable income for the year 2005 $175,000.00 and that the total income tax obligation is 35%.(a)  Journalize the recognition of the tax obligations at the end of the current year.(b)  Journalize the payment of the 2005 tax obligation on March 15, 2006.(c)  Journalize the payment of the 2005 tax obligation on March 15, 2007. 

179. On December 31, 2005, the tax accountants of Mega Sales inform the accountants that 75% of the current year’s tax expense should be considered payable on March 15, 2006, 15% of the tax liability will be payable on March 15, 2007, and the balance will be payable on March 15, 2008.On December 31, 2006, the tax accountants inform the accountants that 80% of the current year’s tax expense should be considered payable on March 15, 2007, and the balance will be payable March 15, 2008.Mega Sales journalizes any taxes payable within the next calendar year to Income Tax Payable and taxes due after the next calendar year to the Deferred Income Tax Payable account.The accountants determine that taxable income for the year 2005 $175,000.00 and that the total income tax obligation is 35%.For the year 2006 the net income is $190,000.00 and that the total income tax obligation is 35%.(a)  Journalize the recognition of the tax obligations at December 31, 2005.(b)  Journalize the payment of the 2005 tax obligation on March 15, 2006.(c)  Journalize the recognition of the tax obligations at December 31, 2006.(d)  Journalize the payment required March 15, 2007 for the 2005 and 2006 tax obligations. 

180. Prepare an Income Statement using the following data for Spiritlight Ventures for the current fiscal year ended December 31: 

Net Sales$21,500,000

Cost of Merchandise Sold10,900,000

Operating Expenses6,300,000

Losses from Asset Impairment2,000,000

Restructuring Charge800,000

Income Tax Expense500,000

Loss on Discontinued Operations200,000

Net Loss on Extraordinary Item100,000

181. From the following data for Noll Company for the current fiscal year ended December 31, prepare a multiple-step income statement. Show parenthetically earnings per share for the following: income from continuing operations, loss on discontinued operations (less applicable income tax), income before extraordinary item, extraordinary item (less applicable income tax), and net income. 

Common stock, $50 par$200,000

Cost of merchandise sold252,000

Administrative expenses48,250

Income tax (applicable to continuing operations)142,000

Interest expense3,750

Loss on discontinued operations, 

  net of applicable tax of $2,7005,400

Sales775,000

Selling expenses83,000

Uninsured flood loss, net of applicable 

  income tax of $4,50014,000