Videos
Noventis Corporation prepared the following estimates for the four quarters of the current year:
Additional Information
• First-quarter administrative costs include the $160,000 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.
• Noventis estimates an effective income tax rate for the year of 40 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 38 percent. Determine the amount of net income to be reported each quarter of the current year.
a.
Determine the amount of net income to be reported each quarter of the current year assuming that actual results do not vary from the estimates provided.
Answer to Problem 39P
The amount of net income to be reported each quarter of the current year assuming that actual results do not vary from the estimates provided is $361200, $448,200, $559,200, $679,200 respectively.
Explanation of Solution
Amount of net income to be reported each quarter of the current year:
| Particulars | First quarter | Second quarter | Third quarter | Fourth quarter |
| Sales | $ 1,300,000 | $ 1,560,000 | $ 1,820,000 | $ 2,080,000 |
| Less: | ||||
| Cost of goods sold | $ 430,000 | $ 510,000 | $ 580,000 | $ 630,000 |
| Administrative costs | $ 190,000 | $ 225,000 | $ 230,000 | $ 240,000 |
| Advertising costs | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 |
| Executive bonuses | $ 19,000 | $ 19,000 | $ 19,000 | $ 19,000 |
| Provision for bad debts | $ 16,000 | $ 16,000 | $ 16,000 | $ 16,000 |
| Annual maintenance costs | $ 18,000 | $ 18,000 | $ 18,000 | $ 18,000 |
| Pre-tax income | $ 602,000 | $ 747,000 | $ 932,000 | $ 1,132,000 |
| Less: Income tax | $ 240,800 | $ 298,800 | $ 372,800 | $ 452,800 |
| Net income | $ 361,200 | $ 448,200 | $ 559,200 | $ 679,200 |
Table: (1)
Working note
Calculate insurance premium per quarter
Thus, insurance premium per quarter is $40,000
Calculate administrative expenses for the first quarter
Thus, administrative expenses for the first quarter is $190,000
Insurance premium per quarter is added to the administrative expenses estimates given.
Advertising costs estimates are equally distributed in the four quarters.
Executive bonuses are equally distributed in four quarters.
Provision for bad debts is equally distributed in four quarters.
Annual maintenance costs are equally distributed in four quarters.
b.
Determine the amount of net income to be reported each quarter of the current year assuming 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 38 percent.
Answer to Problem 39P
The amount of net income to be reported each quarter of the current year assuming 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 38 percent is $361200, $448,200, $577,840, $701,840 respectively.
Explanation of Solution
Amount of net income to be reported each quarter of the current year:
| Particulars | First quarter | Second quarter | Third quarter | Fourth quarter |
| Sales | $ 1,300,000 | $ 1,560,000 | $ 1,820,000 | $ 2,080,000 |
| Less: | ||||
| Cost of goods sold | $ 430,000 | $ 510,000 | $ 580,000 | $ 630,000 |
| Administrative costs | $ 190,000 | $ 225,000 | $ 230,000 | $ 240,000 |
| Advertising costs | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 |
| Executive bonuses | $ 19,000 | $ 19,000 | $ 19,000 | $ 19,000 |
| Provision for bad debts | $ 16,000 | $ 16,000 | $ 16,000 | $ 16,000 |
| Annual maintenance costs | $ 18,000 | $ 18,000 | $ 18,000 | $ 18,000 |
| Pre-tax income | $ 602,000 | $ 747,000 | $ 932,000 | $ 1,132,000 |
| Less: Income tax | $ 240,800 | $ 298,800 | $ 354,160 | $ 430,160 |
| Net income | $ 361,200 | $ 448,200 | $ 577,840 | $ 701,840 |
Table: (2)
Income tax rate is 40 percent for first and second quarter and it has changed to 38 percent in the third and fourth quarter.
Want to see more full solutions like this?
Chapter 8 Solutions
Advanced Accounting - Standalone book
- incoporate the accounting conceptual frameworksarrow_forwarda) Define research methodology in the context of accounting theory and discuss the importance of selecting appropriate research methodology. Evaluate the strengths and limitations of quantitative and qualitative approaches in accounting research. b) Assess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape research questions, hypotheses formulation, and empirical analysis. Question 4 Critically analyse the role of financial reporting in investment decision-making, emphasizing the qualitative characteristics that enhance the usefulness of financial statements. Discuss how financial reporting influences both investor confidence and regulatory decisions, using relevant examples.arrow_forwardFastarrow_forward
- CODE 14 On August 1, 2010, Cheryl Newsome established Titus Realty, which completed the following transactions during the month: a. Cheryl Newsome transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $25,000. b. Paid rent on office and equipment for the month, $2,750. c. Purchased supplies on account, $950. d. Paid creditor on account, $400. c. Earned sales commissions, receiving cash, $18,100. f. Paid automobile expenses (including rental charge) for month, $1,000, and miscel- laneous expenses, $600. g. Paid office salaries, $2,150. h. Determined that the cost of supplies used was $575. i. Paid dividends, $2,000. REQUIREMENTS: 1. Determine increase - decrease of each account and new balance 2. Prepare 3 F.S: Income statement; Retained Earnings Statement; Balance Sheet Scanned with CamScannerarrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2024 on the assets it placed in service in 2024, assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum total depreciation deduction (including §179 expense)arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. b. What is the allowable depreciation on Evergreen's property in the current year if Evergreen does not elect out of bonus depreciation and elects out of §179 expense?arrow_forward
- Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn't want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $40,000, and business use is 100 percent (ignore §179 expense). Year Depreciation deduction 2024 2025arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. What is the allowable depreciation on Evergreen's property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation?arrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 a. What is the maximum amount of §179 expense TDW may deduct for 2024? Maximum §179 expense deductiblearrow_forward
- helparrow_forwardIdentify and discuss at least 7 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. d. Assume the building was purchased and placed in service on 17-Feb of year 1 and is residential property. Depreciation Expense Year 1 Year 2 $ 36,632 Year 3 $ 36,632arrow_forward
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning