Question

Provo, Inc. has an estimated annual tax rate of 35% in the first quarter of 2021. Pretax income for the first quarter was $300,000. At the end of the second quarter of 2021, Provo expects the annual tax rate to be 32% because of anticipated tax credits. Pretax income for the second quarter was $350,000. Assume no items in either quarter requiring the net-of-tax presentation.

Required:
How much income tax expense is recognized in the secound quarter of 2021?

Answer 1

Provo, Inc. will recognize an income tax expense of $112,000 for the second quarter of 2021 with an annual tax rate of 32% applied to the quarter's pretax income.

Step-by-step explanation:

To calculate the income tax expense recognized in the second quarter of 2021 for Provo, Inc., we consider the revised annual tax rate of 32% and apply it to the pretax income for that quarter. This change reflects anticipated tax credits that the company expects to receive. Therefore, the income tax expense for the second quarter is 32% of the quarter’s pretax income of $350,000.

The calculation is as follows:

1. Second quarter pretax income: $350,000.
2. Estimated annual tax rate for the second quarter: 32%.
3. Tax expense for the second quarter: 0.32 * $350,000 = $112,000.

Thus, Provo, Inc. would recognize an income tax expense of $112,000 for the second quarter of 2021.

Answer 2

$105,000

Step-by-step explanation:

Calculation for How much income tax expense is recognized in the secound quarter of 2021

Secound quarter income tax expense=$300,000 × .35

Secound quarter income tax expense= $105,000

Therefore How much income tax expense is recognized in the secound quarter of 2021 is $105,000