Introduction: To operate a business, a taxpayer generally chooses between individual trading,
To choose: The best practice when a Corporation has a tax liability to avoid penalty.
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Income Tax Fundamentals 2020
- How do the all events and economic performance requirements apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its products for six months. At the end of 2019, customers had made valid claims for 600,000 that were not paid until 2020. Also, the company estimates that another 400,000 in claims from 2019 sales will be filed and paid in 2020. b. The accrual basis taxpayer reported 200,000 in corporate taxable income for 2019. The state income tax rate was 6%. The corporation paid 7,000 in estimated state income taxes in 2019 and paid 2,000 on 2018 state income taxes when it filed its 2018 state income tax return in March 2019. The company filed its 2019 state income tax return in March 2020 and paid the remaining 5,000 of its 2019 state income tax liability. c. An employee was involved in an accident while making a sales call. The company paid the injured victim 15,000 in 2019 and agreed to pay the victim 15,000 a year for the next nine years.arrow_forwardE Corporation is a subchapter S corporation owned by three individuals with calendar year-ends. The corporation sells a sports drink as its principal product and has similar sales each month. What options does E Corporation have in choosing a tax year? E Corporation may choose any month end as its tax year. Because the owners of E Corporation have tax years ending in December, E Corporation must also choose a December year-end. E Corporation may choose an October, November, or December tax year-end. E Corporation may choose a tax year ending in September, October, or November, but only if the corporation also makes an annual cash deposit and adjusts the amount every year depending on the income deferred.arrow_forwardIn the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of 5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madisons income taxes at the end of the year.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning