The following information applies to the operations of MK Inc. for 2018 and 2019. Assume a tax rate of 25% for both years.

2018 information:
Sales on account in the amount of $675,000
Warranty expense and associated liability in the amount of $135,000
No other expenses incurred.

2019 information:
Sales on account in the amount of $215,000
Warranty repairs made in the amount of $60,000
No expenses incurred.

What is MK's income tax payable for 2018?

Question

The following information applies to the operations of MK Inc. for 2018 and 2019. Assume a tax rate of 25% for both years.

2018 information:
Sales on account in the amount of $675,000
Warranty expense and associated liability in the amount of $135,000
No other expenses incurred.

2019 information:
Sales on account in the amount of $215,000
Warranty repairs made in the amount of $60,000
No expenses incurred.

What is MK's income tax payable for 2018?

Quizplus · Accepted Answer

Income before taxes = Sales - Warranty expense = $675,000 - $135,000 = $540,000Income tax payable = Income before taxes * Tax rate = $540,000 * 25% = $168,750

The Following Information Applies to the Operations of MK Inc