In its first year of operations, Martha Enterprises Corp. reported the following information: a. Income before income taxes was $710,000. b. The company acquired capital assets costing $3,100,000; depreciation was $181,000, and CCA was $155,000. c. The company recorded an expense of $190,000 for the one-year warranty on the company's products; cash disbursements amounted to $86,000. d. The company incurred development costs of $84,000 that met the criteria for capitalization for accounting purposes. Development work was still ongoing at year-end. These costs could be immediately deducted for tax purposes. e. The company made a political contribution of $37,000 and expensed this for accounting purposes. f. The income tax rate was 28% and the year 2 tax rate was enacted, at 30%. In the second year, the company reported the following: a. Earnings before income tax were $1,770,000. b. Depreciation was $181,000; CCA was $430,000. c. The estimated warranty costs were $285,000, while the cash expenditure was $375,000. d. Additional development costs of $235,000 were incurred to complete the project. For accounting purposes, amortization of $55,000 was recorded. e. Golf club memberships for top executives cost $42,000; this was expensed for accounting purposes as a marketing expense. Required: 1. Prepare the journal entries to record income tax expense for the first and second years of operation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
In its first year of operations, Martha Enterprises Corp. reported the following information: a. Income before income taxes was $710,000. b. The company acquired capital assets costing $3,100,000; depreciation was $181,000, and CCA was $155,000. c. The company recorded an expense of $190,000 for the one-year warranty on the company's products; cash disbursements amounted to $86,000. d. The company incurred development costs of $84,000 that met the criteria for capitalization for accounting purposes. Development work was still ongoing at year-end. These costs could be immediately deducted for tax purposes. e. The company made a political contribution of $37,000 and expensed this for accounting purposes. f. The income tax rate was 28% and the year 2 tax rate was enacted, at 30%. In the second year, the company reported the following: a. Earnings before income tax were $1,770,000. b. Depreciation was $181,000; CCA was $430,000. c. The estimated warranty costs were $285,000, while the cash expenditure was $375,000. d. Additional development costs of $235,000 were incurred to complete the project. For accounting purposes, amortization of $55,000 was recorded. e. Golf club memberships for top executives cost $42,000; this was expensed for accounting purposes as a marketing expense. Required: 1. Prepare the journal entries to record income tax expense for the first and second years of operation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Journal entry worksheet
1
2
Record the income tax expense for the second year of operation.
Note: Enter debits before credits.
Transaction
Year 2
Record entry
Account Title
Clear entry
Debit
Credit
View general journal
>
Transcribed Image Text:In its first year of operations, Martha Enterprises Corp. reported the following information:
a. Income before income taxes was $710,000.
b. The company acquired capital assets costing $3,100,000; depreciation was $181,000, and CCA was $155,000.
c. The company recorded an expense of $190,000 for the one-year warranty on the company's products; cash disbursements
amounted to $86,000.
d. The company incurred development costs of $84,000 that met the criteria for capitalization for accounting purposes. Development
work was still ongoing at year-end. These costs could be immediately deducted for tax purposes.
e. The company made a political contribution of $37,000 and expensed this for accounting purposes.
f. The income tax rate was 28% and the year 2 tax rate was enacted, at 30%.
In the second year, the company reported the following:
a. Earnings before income tax were $1,770,000.
b. Depreciation was $181,000; CCA was $430,000.
c. The estimated warranty costs were $285,000, while the cash expenditure was $375,000.
d. Additional development costs of $235,000 were incurred to complete the project. For accounting purposes, amortization of
$55,000 was recorded.
e. Golf club memberships for top executives cost $42,000; this was expensed for accounting purposes as a marketing expense.
Required:
1. Prepare the journal entries to record income tax expense for the first and second years of operation. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)
View transaction list
Journal entry worksheet
1
2
Record the income tax expense for the first year of operation.
Note: Enter debits before credits.
Transaction
Account Title
Debit
Credit
>
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