Question

S- You note during the review of sales, that a rebate was issued for the 2018 Income Tax Game to encourage sales. 24,500 games were sold. Customers can mail in their receipt and receive a $1 rebate per game. It is estimated that 48% of customers will send in the rebate. The rebate expires on January 31, 2019. To date, 12,800 rebates have been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $12,800. The management of Czar would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.

                       

T- Czar has a straight tax rate of 30%. Income tax expense is Net Income before taxes times 30%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)

Czar Incorporated
End of Period Worksheet
For the Year Ended December 31, 2018
	Unadjusted				Adjusted
Account Title	Trial Balance		Adjustments		Trial Balance
	DR	CR	DR	CR	DR	CR
Cash	264,000	-
Accounts Receivable	555,984	-
Allowance for Doubtful Accounts	-	13,600
Interest Receivable	-	-
Merchandise Inventory	340,000	-
Prepaid Insurance	-	-
LIFO Reserve	-	25,600
Prepaid Advertising	-	-
Prepaid Rent	13,600	-
Office Supplies	4,800	-
Note Receivable	20,000
Available for Sale Securities	300,000	-
Office Building	3,000,000	-
Accumulated Depreciation - Office Building	-	70,000
Storage Building	1,020,000	-
Accumulated Depreciation - Storage Building	-	-
Land	600,000	-
Leasehold Improvements	180,000	-
Accumulated Depreciation - Leasehold Improvements	-	-
Office Equipment	260,000	-
Accumulated Depreciation - Office Equipment	-	52,000
Patent	120,000	-
Accounts Payable	-	276,000
Sales Tax Payable	-	-
Salaries Payable	-	113,600
Payroll Taxes Payable	-	20,000
Interest Payable	-	-
Income Tax Payable	-	-
Unearned Rent Revenue	-	-
Loan Payable - First Trust	-	520,000
Loan Payable - Coldwell Bank	-	1,600,000
Common Stock	-	520,000
Additional Paid in Capital	-	1,599,000
Retained Earnings	-	736,000
Accumulated Other Comprehensive Income	-	20,000
Dividends	67,800	-
Sales	-	3,622,560
Sales Returns and Allowances	33,800	-
Sales Discounts	15,400	-
Cost of Goods Sold	1,583,600	-
Sales Salaries Expense	349,120	-
Office Salaries Expense	219,200	-
Advertising Expense	12,800	-
Depreciation Expense - Office Building	-
Depreciation Expense - Leasehold Improvements	-	-
Depreciation Expense - Office Equipment	-	-
Leasing Expense - Stores	105,600	-
Miscellaneous Selling Expense	18400	-
Research & Development Expense	12,000
Rent Expense - Storage Facility	-	-
Insurance Expense	12,000	-
Office Supplies Expense	28,000	-
Miscellaneous Administrative Expense	7,336	-
Rent Revenue	-	60,000
Interest Revenue on Note Receivable	-	-
Dividend Revenue on AFS Securities	-	20,000
Interest Expense	-	-
Bad Debt Expense	28,000	-
Amortization Expense	-	-
Income Tax Expense	-	-
Payroll Taxes Expense	96,920	-
Rebate Expense	-	-
Unrealized holding loss	-	-
Depreciation Expense-Storage Building	-	-
Loss on Impairment	-	-
Rebate Liability	-	-
Restricted Cash for Future Expansion	-	-
	9,268,360	9,268,360

Answer 1

Income Statement
Revenue
Sales	$ 36,22,560
Rent revenue	$        60,000
Dividend received	$        20,000
Total revenue	$ 37,02,560
Expenses
Sales return and allowances	$        33,800
Sales Discount	$        15,400
Cost of goods sold	$ 15,83,600
Sales salaries expenses	$    3,49,120
Office salalries expenses	$    2,19,200
Advertising expenses	$        12,800
Leasing expenses - stores	$    1,05,600
Rebat Expenses	$        12,800
Miscellenious selling expenses	$          5,600
Research & development expenses	$        12,000
insurance expenses	$        12,000
office supplies expenses	$        28,000
Misecellenious administrative expenses	$          7,336
Bad debts expenses	$        28,000
payroll taxes expenses	$        96,920
Total expenses	$ 25,22,176
Profit before tax	$ 11,80,384
Tax expenses @ 30%	$    3,54,115
Net income	$    8,26,269

Income tax expense	$ 3,54,115
To Income tax payable		$ 3,54,115
(Being income tax expense recorded)