Lesson 2
Amanda Company began manufacturing operations on January 2, Year 4.
In Year 4, Amanda earned a pretax book income of $300,000 and had
taxable income of $400,000. The difference related to accrued product
warranty costs which are expected to be paid out as follows: Year 5:
$60,000; Year 6: $30,000; and Year 7: $10,000. The enacted tax rates are
30% for Years 4 and 5 and 40% for Years 6 and 7. If Amanda paid no
estimated taxes, what is the income tax payable to be reported at the end
of Year 4?
a.
$120,000
b.
$125,000
c.
$130,000
d.
$134,000
