Corriveau Industries decided to switch from an accelerated depreciation method to a straight-line method in the second quarter of 2016.This is classified as a cumulative effect of a change in accounting principle.The first-quarter, pretax income reported was $30,000, and projected pretax income for 2016 was $90,000.If Corriveau had used straight-line depreciation for the quarter, pretax income would have been $35,000 and projected pretax income for 2016 would have been $110,000.The cumulative effect on prior years from the change is a $50,000 increase in retained earnings.The second-quarter income using straight-line depreciation is $20,000, and the expected annual earnings continue to be $110,000.Assume that Corriveau is subject to a flat 25% statutory tax rate for 2016.Corriveau is expecting $5,000 of tax-free income during the third and fourth quarters of 2016.

Required:

For all categories of income, calculate the interim tax expense for the first quarter, first quarter restated, and second quarter.

Question

Corriveau Industries decided to switch from an accelerated depreciation method to a straight-line method in the second quarter of 2016.This is classified as a cumulative effect of a change in accounting principle.The first-quarter, pretax income reported was $30,000, and projected pretax income for 2016 was $90,000.If Corriveau had used straight-line depreciation for the quarter, pretax income would have been $35,000 and projected pretax income for 2016 would have been $110,000.The cumulative effect on prior years from the change is a $50,000 increase in retained earnings.The second-quarter income using straight-line depreciation is $20,000, and the expected annual earnings continue to be $110,000.Assume that Corriveau is subject to a flat 25% statutory tax rate for 2016.Corriveau is expecting $5,000 of tax-free income during the third and fourth quarters of 2016.
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Required:
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For all categories of income, calculate the interim tax expense for the first quarter, first quarter restated, and second quarter.

Quizplus · Accepted Answer

The Answer of Corriveau Industries decided to switch from an accelerated depreciation method to a straight-line method in the second quarter of 2016.This is classified as a cumulative effect of a change in accounting principle.The first-quarter, pretax income reported was $30,000, and projected pretax income for 2016 was $90,000.If Corriveau had used straight-line depreciation for the quarter, pretax income would have been $35,000 and projected pretax income for 2016 would have been $110,000.The cumulative effect on prior years from the change is a $50,000 increase in retained earnings.The second-quarter income using straight-line depreciation is $20,000, and the expected annual earnings continue to be $110,000.Assume that Corriveau is subject to a flat 25% statutory tax rate for 2016.Corriveau is expecting $5,000 of tax-free income during the third and fourth quarters of 2016.
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Required:
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For all categories of income, calculate the interim tax expense for the first quarter, first quarter restated, and second quarter.

Corriveau Industries Decided to Switch from an Accelerated Depreciation Method