Millstone Company's first-quarter 20X3, pretax income is $25,000. The company anticipates an annual tax credit of $5,500. Millstone is projecting income for the remaining three quarters of $95,000. For the second quarter of 20X4, Millstone reports $55,000 of pretax income with a projected pre-tax income for the remainder of the year of $65,000. Millstone does not have any permanent differences between taxable income and financial income.
In the second quarter, Millstone decided to change their depreciation method used for financial reporting purposes. The change in depreciation methods has the following effect on the calculation and projection of income for Millstone:
The effect of the change on prior years is a decrease to retained earnings of $30,000.
The current tax schedule is:
Required:
Calculate the first and second quarter interim tax expenses on continuing income.

Question

Millstone Company's first-quarter 20X3, pretax income is $25,000. The company anticipates an annual tax credit of $5,500. Millstone is projecting income for the remaining three quarters of $95,000. For the second quarter of 20X4, Millstone reports $55,000 of pretax income with a projected pre-tax income for the remainder of the year of $65,000. Millstone does not have any permanent differences between taxable income and financial income.
In the second quarter, Millstone decided to change their depreciation method used for financial reporting purposes. The change in depreciation methods has the following effect on the calculation and projection of income for Millstone:  
The effect of the change on prior years is a decrease to retained earnings of $30,000.
The current tax schedule is:  
Required:
Calculate the first and second quarter interim tax expenses on continuing income.

Quizplus · Accepted Answer

The Answer of Millstone Company's first-quarter 20X3, pretax income is $25,000. The company anticipates an annual tax credit of $5,500. Millstone is projecting income for the remaining three quarters of $95,000. For the second quarter of 20X4, Millstone reports $55,000 of pretax income with a projected pre-tax income for the remainder of the year of $65,000. Millstone does not have any permanent differences between taxable income and financial income.
In the second quarter, Millstone decided to change their depreciation method used for financial reporting purposes. The change in depreciation methods has the following effect on the calculation and projection of income for Millstone:  
The effect of the change on prior years is a decrease to retained earnings of $30,000.
The current tax schedule is:  
Required:
Calculate the first and second quarter interim tax expenses on continuing income.

Millstone Company's First-Quarter 20X3, Pretax Income Is $25,000