In its interim report for the three months ended January 31, 2006, the first quarter of its fiscal year ending October 31, 2006, Wister Company had income taxes expense of $52,800 ($100,000 x 0.528). On April 30, 2006, Wister estimated that its effective income tax rate for the year ending October 31, 2006, would be 50.9%. If Wister's pre-tax financial income for the three months ended April 30, 2006, was $110,000, Wister's income taxes expense for the three months ended April 30, 2006, is:

Question

Quizplus · Accepted Answer

Wister's income taxes expense for the three months ended April 30, 2006, is calculated by first determining the total income tax expense for the six months (January to April) using the revised effective tax rate of 50.9%, and then subtracting the income tax expense already recognized in the first quarter. The total pre-tax income for the six months is $100,000 (for January to March) + $110,000 (for April), totaling $210,000. The total income tax expense at the revised rate is $210,000 x 0.509 = $106,890. The income tax expense for the first quarter was $52,800, so the additional expense for the second quarter is $106,890 - $52,800 = $54,090.

In Its Interim Report for the Three Months Ended January