Homework Help is Here – Start Your Trial Now!
Business
Accounting
1.Please Complete Solution With Details 2.Final Answer Clearly Mentioned 3.Do not give solution in image format

1.Please Complete Solution With Details 2.Final Answer Clearly Mentioned 3.Do not give solution in image format

Income Tax Fundamentals 2020
Income Tax Fundamentals 2020
38th Edition
ISBN:9780357391129
Author:WHITTENBURG
Publisher:WHITTENBURG
Chapter11: The Corporate Income Tax
Section: Chapter Questions
Problem 11MCQ
See similar textbooks
icon
Related questions
Question
1.Please Complete Solution With Details 2.Final Answer Clearly Mentioned 3.Do not give solution in image format
12. ABC was formed by an investor who exchanged 2,000,000 for 100,000 shares of stock on August 1. ABC prepaid 12 months of rent by paying $96,000. ABC hired 3 employees and agreed to pay each $100,000/year. ABC agreed to pay on the first of each month after the services are performed. ABC withholds 20% for federal tax; 5% for state tax; and 7.65% for FICA. ABC sold services over the year for $1,200,000 on account. They warranty their work for 1 year. ABC estimated 1% for bad debts using the percent of sales method. ABC estimated $100,000 in warranty work, but only paid out $20,000 (as cash back) in warranties through the end of the year. ABC received $400,000 in cash against the receivable by year-end. On 8/15 ABC purchased equipment signing a note for $300,000. ABC depreciated the equipment by $30,000 for book purposes and $50,000 for tax purposes. ABC accrued $5,000 in interest expense. On 8/1 ABC invested $100,000 into muni-bonds. The bonds were valued at 102,000 by year- end and paid $7,000 in interest. ABC provides a pension plan for the employees. The service cost for the year was $5,000, the interest cost was $500. ABC contributed 100% of the cost of the plan by contributing $5,500 to the retirement fund. The pension plan assets increased in value by $1,000 by year-end. ABC paid a dividend of $50,000 in cash. Tax rate is 21%. Prepare income statement, balance sheet, and closing entry.
Transcribed Image Text:12. ABC was formed by an investor who exchanged 2,000,000 for 100,000 shares of stock on August 1. ABC prepaid 12 months of rent by paying $96,000. ABC hired 3 employees and agreed to pay each $100,000/year. ABC agreed to pay on the first of each month after the services are performed. ABC withholds 20% for federal tax; 5% for state tax; and 7.65% for FICA. ABC sold services over the year for $1,200,000 on account. They warranty their work for 1 year. ABC estimated 1% for bad debts using the percent of sales method. ABC estimated $100,000 in warranty work, but only paid out $20,000 (as cash back) in warranties through the end of the year. ABC received $400,000 in cash against the receivable by year-end. On 8/15 ABC purchased equipment signing a note for $300,000. ABC depreciated the equipment by $30,000 for book purposes and $50,000 for tax purposes. ABC accrued $5,000 in interest expense. On 8/1 ABC invested $100,000 into muni-bonds. The bonds were valued at 102,000 by year- end and paid $7,000 in interest. ABC provides a pension plan for the employees. The service cost for the year was $5,000, the interest cost was $500. ABC contributed 100% of the cost of the plan by contributing $5,500 to the retirement fund. The pension plan assets increased in value by $1,000 by year-end. ABC paid a dividend of $50,000 in cash. Tax rate is 21%. Prepare income statement, balance sheet, and closing entry.
Expert Solution
steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Database design
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Income Tax Fundamentals 2020
Income Tax Fundamentals 2020
Accounting
ISBN:
9780357391129
Author:
WHITTENBURG
Publisher:
Cengage
SWFT Corp Partner Estates Trusts
SWFT Corp Partner Estates Trusts
Accounting
ISBN:
9780357161548
Author:
Raabe
Publisher:
Cengage
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
SWFT Comprehensive Volume 2019
SWFT Comprehensive Volume 2019
Accounting
ISBN:
9780357233306
Author:
Maloney
Publisher:
Cengage
CONCEPTS IN FED.TAX., 2020-W/ACCESS
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:
9780357110362
Author:
Murphy
Publisher:
CENGAGE L
SWFT Comprehensive Vol 2020
SWFT Comprehensive Vol 2020
Accounting
ISBN:
9780357391723
Author:
Maloney
Publisher:
Cengage
SEE MORE TEXTBOOKS