The following information applies to the operations of MK Inc. for 2018 and 2019. Assume a tax rate of 20% for both years.

2018 information:
Sales on account in the amount of $675,000
Warranty expense and associated liability in the amount of $145,000
No other expenses incurred.

2019 information:
Sales on account in the amount of $210,000
Warranty repairs made in the amount of $69,000
No expenses incurred.

What is MK's income tax expense for 2018?

Question

The following information applies to the operations of MK Inc. for 2018 and 2019. Assume a tax rate of 20% for both years.

2018 information:
Sales on account in the amount of $675,000
Warranty expense and associated liability in the amount of $145,000
No other expenses incurred.

2019 information:
Sales on account in the amount of $210,000
Warranty repairs made in the amount of $69,000
No expenses incurred.

What is MK's income tax expense for 2018?

Quizplus · Accepted Answer

The income tax expense for 2018 is calculated as follows: Sales ($675,000) minus warranty expense ($145,000) equals taxable income ($530,000). Taxable income ($530,000) multiplied by the tax rate (20%) equals $106,000.

The Following Information Applies to the Operations of MK Inc