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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Current liabilities

Born Nebo Co. sold 25,000) annual subscriptions of Magazine 20XX for $85 during December 20Y8. These new subscribers will receive monthly issues, beginning in January 20Y9. In addition, the business had taxable income of $840,000 during the first calendar quarter of 20Y9. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 20Y9.

Prepare the Current liabilities section of the balance sheet for Bon Nebo Co. on March 31, 20Y9.

To determine

Current liabilities: Liabilities are debt and obligations of a business. Current liability is the obligation, which the company is responsible to pay the outsiders within a year.

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources, on a specific date. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

To prepare: The current liabilities section of the balance sheet for Corporation B on March 31, 20Y6.

Explanation

Prepare the current liabilities section of the balance sheet for Corporation B on March 31, 20Y9.

Corporation B

Balance Sheet (Partial)

March 31, 20Y9

Current Liabilities:
Federal Income Taxes Payable (1) $336,000
Advance on magazine subscriptions (2) $1,593,750
Total Current Liabilities $1,929,750

Table (1)

Working notes:

Calculate the amount of federal income taxes payable.

Federal income taxes payable=Taxableincome×Taxrate=

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