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Item 2

Item 2 2.5 points

All of the accounts of the Grass is Greener Company have been adjusted as of December 31, 2018, with the exception of income taxes incurred but not yet recorded. Those account balances appear below. All have normal balances. The estimated income tax rate for the company is 40%.

Cash	$	369,340
Accounts Receivable		789,950
Interest Receivable		5,200
Prepaid Insurance		7,700
Prepaid Rent		13,000
Supplies		225,900
Equipment		690,500
Accumulated Depreciation		143,300
Accounts Payable		299,700
Deferred Revenue		92,600
Income Tax Payable		0
Salaries and Wages Payable		28,800
Notes Payable (long-term)		374,040
Long–Term Debt		247,600
Common Stock		402,200
Retained Earnings		221,800
Dividends		23,600
Service Revenue		958,000
Interest Revenue		132,100
Supplies Expense		354,200
Repairs and Maintenance Expense		262,300
Depreciation Expense		61,350
Rent Expense		32,300
Income Tax Expense		Unknown

Required:

1. Calculate the income before income tax.
2. Calculate the income tax expense.
3. Calculate the net income.

Answer 1

a) Income before income tax

Service revenue	958000
Interest revenue	132100
Supplies expense	-354200
Repairs and maintenance expense	-262300
Depreciation expense	-61350
Rent expense	-32300
Income before income tax	379950

b) Income tax expense = 379950*40% = 151980

c) Net income = 379950-151980 = 227970