Question

In its first year of operations Acme Corp. had income before tax of $450,000. Acme made income tax payments totaling $116,000 during the year and has an income tax rate of 30%. What is the balance in income tax payable at the end of the year?

a) $ 19,000 debit.
b) $ 19,000 credit.
c) $135,000 credit.
d) $116,000 credit.

Answer 1

b) $ 19,000 credit

Step-by-step explanation:

Calculation for the balance in income tax payable at the end of the year

Since we were told that the income before tax was $450,000 and the income tax rate was 30% the first step will be to find the 30% of $450,000

30%×$450,000

=$135,000

Second step

Since we were told that the income tax payments $116, 000 during the year this means that the balance in income tax payable at the end of the year will be calculated as

$135,000-$116,000

=$19,000

Therefore the balance in income tax payable at the end of the year will be $19,000 credit