Question

Oriole Company made the following journal entry in late 2021 for rent on property it leases to Danford Corporation. Cash 153000 Unearned Rent Revenue 153000 The payment represents rent for the years 2022 and 2023, the period covered by the lease. Oriole Company is a cash basis taxpayer. Oriole has income tax payable of $233000 at the end of 2021, and its tax rate is 25%. Assuming the income taxes payable at the end of 2022 is $258000, what amount of income tax expense would Oriole Company record for 2022?

Answer 1

Answer:

$277,125

Explanation:

The calculation of  income tax expense is shown below:-

Income tax expense = Income taxes payable at the end of 2022 + (Rent revenue ÷ 2) × Tax rate

= $258,000 + (($153,000 ÷ 2) × 0.25)

= $258,000 + $76,500 × 0.25

= $258,000 + $19,125

= $277,125

Therefore for computing the income tax revenue we simply applied the above formula.