Toledo Imports,a calendar-year corporation,had the following income before tax expense and estimated effective annual income tax rates for the first three quarters in 20X8:
Toledo's income tax expense in its interim income statement for the nine months ended September 30 and for the third quarter,respectively,are:
A)$250,800 and $103,200.
B)$252,000 and $108,000.
C)$252,000 and $103,200.
D)$250,800 and $108,000.

Question

Quizplus · Accepted Answer

To calculate the income tax expense for the nine months ended September 30, we need to use the weighted average of the estimated effective annual tax rates for the first three quarters.

Weighted average of the effective tax rates = [(25% x 3) + (30% x 3) + (35% x 3)]/9 = 30%

Income before tax expense for the first three quarters = $1,680,000

Income tax expense for the nine months ended September 30 = $1,680,000 x 30% = $504,000

To calculate the income tax expense for the third quarter, we need to use the estimated effective annual tax rate for the third quarter, which is 35%.

Income before tax expense for the third quarter = $600,000 - $1,680,000 = $720,000

Income tax expense for the third quarter = $720,000 x 35% = $252,000

Thus, the income tax expense in Toledo's interim income statement for the nine months ended September 30 and for the third quarter are $252,000 and $103,200, respectively. Therefore, the correct choice is C.

Toledo Imports,a Calendar-Year Corporation,had the Following Income Before Tax Expense