Cref,Inc.,estimated at January 1,20X3,that its income before taxes for the year ended December 31,20X3,would be $600,000.Cref,Inc.'s tax rate for the year is 40%.The company made quarterly tax payments on April,June,September,and December 15.The actual income before taxes for the year ended December 31,20X3,for Cref,Inc.,was $620,000.What was the balance in the income tax payable account at December 31,20X3 after payment of yearly taxes?
A)$0
B)$8,000
C)$15,000
D)$10,000
E)$20,000

Question

Quizplus · Accepted Answer

Cref, Inc.'s actual income before taxes was $620,000, with a tax rate of 40%. Therefore, the actual tax liability is 40% of $620,000 = $248,000. If the company estimated its income to be $600,000, the estimated tax liability would be 40% of $600,000 = $240,000. The difference between the actual and estimated tax liability is $248,000 - $240,000 = $8,000, which is the balance in the income tax payable account after the payment of yearly taxes.

Cref,Inc,estimated at January 1,20X3,that Its Income Before Taxes for the Year