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Income Tax

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The following information is available for Nielsen Company after its first year of operations:
Income before taxes $250,000
Federal income tax payable $104,000
Deferred income tax (4,000)
Income tax expense 100,000
Net income $150,000

Nielsen estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $95,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

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Solution Summary

The solution determines what amount was actually paid this year for warranty claims.

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Please find my response below.

(D) Income Tax Payable is 104,000. This corresponds to a pre tax income of 104,000/0.4 = 260,000. Thus the tax income ...

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