Based on its income for the month, a company estimates that it will owe $23,000 of federal income taxes for the month of May. What is the effect of the adjustment on the financial statements?

Question

Quizplus · Accepted Answer

The adjustment will increase income taxes expense, which is a reduction in net income and stockholders' equity. It will also increase income taxes payable, which is a liability. Therefore, options A and C are incorrect, and option D is the opposite of what will happen.

Based on Its Income for the Month, a Company Estimates