The following pretax amounts were obtained from the financial records of Watson Company for 2015: The companys

The following pretax amounts were obtained from the financial records of Watson Company for 2015:

The company’s tax rate is 35 percent.
a. Prepare an income statement for the year ended December 31, 2015, using the multistep format.
b. Prepare a reconciliation of retained earnings for the year ended December 31, 2015.
c. What is the income tax effect associated with each item that is reported net of tax? Assuming that no taxes were owed at the beginning of 2015 and no tax payments were made during 2015, what is the total income tax liability at the end of2015?

Transcribed Image Text:

Debit Credit 847,000 1,385,000 360,000 Retained earnings (1/1/15) Sales revenues Rent revenue Cost of goods sold Administrative expenses Depreciation expense Selling expenses Extraordinary loss Loss on sale of fixed assets Dividends declared 475,000 100,000 250,000 189,000 202,000 105,000 460,000