I think it's one and four but not so sure?
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Answer:
1. Prepare an income statement for Allstar for the past month.
The income statement is given below.
Sales $ 410,000
Commission Cost ($ 50,000)
Technology Cost ($ 75,000)
R/D Cost* ($ 200,000)
Selling expenses ($ 10,000)
Admin expenses ($ 35,000)
Net profit $ 40,000
* In absence of information it is assumed that research and development costs of $200,000 meet defination of expense as per accounting standard (IAS 38).
2. Briefly explain why Allstar's income statement has no line for cost of goods sold.
As per question Allstars is a service oriented company. In services oriented company there is no good that company is manufacturing and selling. So there will not be any cost of good sold line item in income statement.
Answer:
Explanation:
The journal entry is shown below:
Income tax expense A/c Dr $30,035,000
To Deferred tax asset A/c $35,000
To Income tax payable A/c $30,000,000
(Being the income tax expense is recorded)
The computation is shown below:
For deferred tax asset:
= Deferred tax rate - Warrant liability × tax rate
= $435,000 - $1,000,000 × 40%
= $435,000 - $400,000
= $35,000
For income tax payable:
= Taxable income × tax rate
= $75,000,000 × 40%
= $30,000,000
