Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated income taxes are accrued each month for 30% of the current month’s net income. The income taxes are paid in the first month of each quarter for the amount accrued for the prior quarter. The following infor-mation is available for the fourth quarter of the year just ended. When tax computations are completed on January 20 of the following year, Nishi determines that the quarter’s Income Taxes Payable account balance should be $28,300 on December 31 of the year just ended (its unadjusted balance is $24,690). October net income . . . . . . . $28,600 November net income . . . . $19,100 December net income . . . . . $34,600 1. Determine the amount of the accounting adjustment (dated as of December 31) to get the correct ending balance in the Income Taxes Payable account. 2. Prepare journal entries to record (a) the December 31 adjustment to the Income Taxes Payable account and (b) the later January 20 payment of the fourth-quarter taxes.
Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated
income taxes are accrued each month for 30% of the current month’s net income. The income taxes
are paid in the first month of each quarter for the amount accrued for the prior quarter. The following infor-mation is available for the fourth quarter of the year just ended. When tax computations are completed on
January 20 of the following year, Nishi determines that the quarter’s Income Taxes Payable account balance
should be $28,300 on December 31 of the year just ended (its unadjusted balance is $24,690). October net income . . . . . . . $28,600 November net income . . . . $19,100 December net income . . . . . $34,600
1. Determine the amount of the accounting adjustment (dated as of December 31) to get the correct ending
balance in the Income Taxes Payable account.
2. Prepare
and (b) the later January 20 payment of the fourth-quarter taxes.
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