Question

QS 10-13 Recording an incôme taA During 2017, Victory Bubble Tea House recorded $36,000 in estimated income each month and made the payment on the 15th of the following month. On December year-end, it was determined that total income tax expense for the year was $402,00. Record tax expense on December 31 (assuming no entry has yet been made in December to record tax) and payment on January 15, 2018 taxes on the last day of 31, 2017, Victorys the income the

please full calculation and explanation

Answer 1

Answer

• Year 2017’s total income tax expenses are $ 402,000 (actual). This means that Income Tax expense should have a balance of $ 402,000 by the end of year on 31 Dec 2017.
• It has been mentioned in the data that $ 36000 are recorded as income taxes on last day of each month. Also mentioned is that we have to assume that no income tax is recorded in December month.
  This means that $ 36000 per month has been recorded for whole 11 months.
• Total Income Tax expenses recorded = $ 36,000 x 11 months = $ 396,000
• Total Income Tax expense that should have been recorded in 12 months = $ 402,000
• Additional Income tax expenses to be recorded = $ 6,000 [402000 – 396000]
• Journal Entry on 31 Dec 2018 to record income tax expense:

Date	Accounts title	Debit	Credit
31-Dec-18	Income tax expense	$6,000
	Income tax payable		$6,000
	(Income tax accrued to be paid)

• Also, income tax payable account will have the same balance (ie $ 396000) before the above entry.

After the above entry, the balance in Income tax payable account would be $ 402,000 [396000 + 6000 credit above]

• Journal Entry on 15 Jan 2018 to record payment of tax:

Date	Accounts title	Debit	Credit
15-Jan-18	Income tax payable	$402,000
	Cash		$402,000
	(Income tax for 2017 now paid)