Final answer:
To calculate the income tax provision for Cierra Markets, Inc., taxable income is determined by adding recognized revenue from delivered groceries ($66,000) to income before tax ($808,000) and subtracting insurance expenses ($28,000). The taxable income ($846,000) is then multiplied by the tax rate (35%) to obtain the income tax expense ($296,100), which is recorded as a debit to income tax expenses and a credit to income tax payable.
Step-by-step explanation:
The student has asked for help in preparing the journal entry to record the current year income tax provision for Cierra Markets, Inc. To calculate the income tax expense, we need to take into account the company's income before tax, any taxable revenues, and deductible expenses. Cierra has reported an income before considering the delivered groceries and insurance expense of $808,000.
The delivered groceries will add $66,000 to this income as they are now recognized as revenue. The insurance premium of $28,000 will be deducted as an expense. Therefore, the taxable income will be $808,000 + $66,000 - $28,000, which equals $846,000. The tax provision is computed at the 35% tax rate, which equates to $846,000 * 35% = $296,100.
The journal entry to record the income tax provision will be a debit to income tax expense and a credit to income tax payable for $296,100.
Journal Entry:
- Income Tax Expense $296,100
- to Income Tax Payable $296,100
This entry reflects the estimated income taxes the company owes to the government for the current year, to be paid in the future. It is important to note that this represents a provision, an estimate, which may differ from the actual tax payment depending on various factors such as changes in tax laws, the finalization of the tax return, and any other adjustments.