Solaris Corporation prepared the following estimates for the four quarters of the current year. First Quarter Second Quarter Sales Cost of goods sold Administrative costs Advertising costs Executive bonuses Provision for bad debts $ 1,525,000 $ 1,830,000 Third Quarter $ 2,135,000 604,000 235,000 Fourth Quarter $ 2,440,000 654,000 454,000 534,000 400,000 230,000 245,000 Ө 160,000 B в В B B 64,000 8 B B 82,000 Annual maintenance costs. 90,000 e B в Additional Information • First-quarter administrative costs include the $140,000 annual Insurance premium. • Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year. ■ No special Items affect Income during the year. . The company estimates an effective income tax rate for the year of 25 percent. a. Assuming that actual results do not vary from the estimates provided, determine the amount of net Income to be reported each quarter of the current year. b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of the current year. Period Net Income a. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter b. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Solaris Corporation prepared the following estimates for the four quarters of the current year. First Quarter Second Quarter Sales Cost of goods sold Administrative costs Advertising costs Executive bonuses Provision for bad debts $ 1,525,000 $ 1,830,000 Third Quarter $ 2,135,000 604,000 235,000 Fourth Quarter $ 2,440,000 654,000 454,000 534,000 400,000 230,000 245,000 Ө 160,000 B в В B B 64,000 8 B B 82,000 Annual maintenance costs. 90,000 e B в Additional Information • First-quarter administrative costs include the $140,000 annual Insurance premium. • Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year. ■ No special Items affect Income during the year. . The company estimates an effective income tax rate for the year of 25 percent. a. Assuming that actual results do not vary from the estimates provided, determine the amount of net Income to be reported each quarter of the current year. b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of the current year. Period Net Income a. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter b. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Solaris Corporation prepared the following estimates for the four quarters of the current year.
First
Quarter
Second
Quarter
Sales
Cost of goods sold
Administrative costs
Advertising costs
Executive bonuses
Provision for bad debts
$ 1,525,000 $ 1,830,000
Third
Quarter
$ 2,135,000
604,000
235,000
Fourth
Quarter
$ 2,440,000
654,000
454,000
534,000
400,000
230,000
245,000
Ө
160,000
B
в
В
B
B
64,000
8
B
B
82,000
Annual maintenance costs.
90,000
e
B
в
Additional Information
• First-quarter administrative costs include the $140,000 annual Insurance premium.
• Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year.
■ No special Items affect Income during the year.
. The company estimates an effective income tax rate for the year of 25 percent.
a. Assuming that actual results do not vary from the estimates provided, determine the amount of net Income to be reported each
quarter of the current year.
b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual
effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of
the current year.
Period
Net Income
a. 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
b. 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
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