Question

Joplin Laminating Corporation reported income before income taxes during the first three quarters, and management’s estimates of the annual effective tax rate at the end of each quarter as shown below:

 

Required:
Determine the income tax expense to be reported in the income statement in each of the three quarterly reports.

 

Answer 1

                                                                               Quarter      

                                                              First           Second       Third

Cumulative income before taxes     $50,000         $90,000    $190,000

Estimated annual effective tax rate      22%              25%            24%

                                                               11,000           22,500          45,600

Less: Income tax reported earlier        - 0 -            11,000          22,500

Tax expense to be reported           $11,000         $11,500       $ 23,100

Tax expense to be reported           $11,000         $11,500       $ 23,100