Question

Bon Nebo Co. sold 25,000 annual subscriptions of Magazine 2018 for $85 during December 2018. These new subscribers will receive monthly issues, beginning in January 2019. In addition, the business had taxable income of $840,000 during the first calendar quarter of 2019. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 2019. Prepare the Current Liabilities section of the balance sheet for Bon Nebo Co. on March 31, 20Y9.

Answer 1

Answer:

Current liabilities

2,125,000 unarned revenue

336,000 tax payable

2,461,000 total current liability

Explanation:

taxable income x tax-rate = tax payable

840,000 x .4 = 336,000

subscription x value = unearned revenue

25,000 x 85 = 2,125,000 unearned revenue

This amount will decrease over time, as the customers receive their magazines.

Current liabilities

2,125,000 unarned revenue

336,000 tax payable

2,461,000 total current liability