Referring to the fourth transaction on December 1, Wolfpack makes the necessary year- end adjustment to recognize
Question:
Referring to the fourth transaction on December 1, Wolfpack makes the necessary year- end adjustment to recognize rent revenue. Received $9,000 cash for a three-month rental of equipment.
Management estimates the “Estimated Sales Return Liability” credit balance at the end of December should be $4,000.
For purposes of preparing its December bank reconciliation, the following information is available:
· The bank statement shows a cash balance of $98,000 as of Dec 31.
· Interest earned on the bank balance in December totals $250.
· The cash deposit for the sale of land that occurred on Dec 27 has not yet cleared the bank. Received $27,000 in cash from the sale of a parcel of its land. The parcel had an original cost of $22,000.
· Bank service charges for December amount to $70.
· Checks written on December 31 have not yet cleared the bank (check numbers 509 through 521) Salaries Expense and Cash are both 15,000. (521) Cash is $4,000 and Notes Payable is $3840
The company has already made estimated income tax payments of $40,000 during the year. At that time, the company debited “Income Tax Expense” and credited “Cash”.
To compute the final state and federal income tax expense information for the year, the following information is available:
· The state income tax is 5%. (Hint: use the “income before income tax” subtotal computed above to determine the state income tax).
· State income taxes are deductible for federal income tax purposes.
· For simplification purposes, assume that all revenues per the company’s books are taxable, and all expenses per the company’s books are tax-deductible.
· The federal income tax rate is a flat 21%.
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis