Chapter 13 – Segment And Interim Reporting
P13-15 Interim Income Statement
a.
Estimate of effective annual tax rate at end of second quarter:
Estimated
Annual
Amounts
Income from continuing operations
$600,000
Less: Dividend exclusion
(30,000)
Estimated annual taxable income
$570,000
Combined tax rate
x 50%
Estimated annual taxes before credits
$285,000
Less: Business tax credit
(15,000)
Estimated income taxes for year
$270,000
Estimated effective annual tax rate ($270,000/$600,000)
= 45%
b.
Chris, Inc.
Income Statement
For Three Months Ended June 30, 20X2
Sales
$850,000
Cost of goods sold
(525,000)
a
Gross profit
$325,000
Operating expense ($230,000 – $45,000
factory rearrangement deferred)
(185,000)
Income before taxes
$140,000
Income taxes
(68,000)
Net income
$ 72,000
a Computation of Cost of Goods Sold
Cost of goods sold as given
$420,000
Add: LIFO inventory liquidation [7,500 x ($26 – $12)]
105,000
Adjusted cost of goods sold
$525,000
b Computation of Income Taxes
Income (Loss)
Estimated
Tax (Benefit)
Before Taxes
Effective
Less
Reported
Interim
Current
Year-
Annual
Year-
Previously
in this
Period
Period
to-date
Tax Rate
to-date
Provided
Period
1
100,000
100,000
40%
40,000
-0-
40,000
2
140,000
240,000
45%
108,000
40,000
68,000
