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

Question

Quizplus · Accepted Answer

The adjustment will increase the income taxes expense, which will decrease net income for the month, and ultimately decrease retained earnings. It will also increase income taxes payable on the balance sheet, reflecting the amount the company owes in taxes to the government. It will not affect shareholders' equity, as this adjustment does not change the value of the company's assets or liabilities.

Based on Its Income for the Month,a Company Estimates That