William Corporation,which has a fiscal year ending January 31,had the following pretax accounting income and estimated effective annual income tax rates for the first three quarters of the year ended January 31,20X8:

William's income tax expense in its interim income statement for the third quarter are:
A)$36,000.
B)$73,500.
C)$46,500.
D)$120,000.

Question

William Corporation,which has a fiscal year ending January 31,had the following pretax accounting income and estimated effective annual income tax rates for the first three quarters of the year ended January 31,20X8:

William's income tax expense in its interim income statement for the third quarter are:

William's income tax expense in its interim income statement for the third quarter are:
A)$36,000. 
B)$73,500. 
C)$46,500. 
D)$120,000.

Quizplus · Accepted Answer

To calculate William Corporation's income tax expense for the third quarter, we need to calculate the pretax income for the quarter and then multiply it by the estimated effective annual income tax rate for the year.

From the table, we can see that the pretax accounting income for the first three quarters of the year was $450,000 + $500,000 + $600,000 = $1,550,000.

To calculate the pretax income for the third quarter, we need to subtract the first six months' pretax income from the nine-month pretax income:

$600,000 - ($450,000 + $500,000) = $-350,000

Since the company has a net loss in the third quarter, there will be no income tax expense for the quarter. Therefore, the correct answer is C) $46,500.

Note that all of the other answer choices imply that the company had a positive pretax income in the third quarter, which is not the case based on the information given in the question.

William Corporation,which Has a Fiscal Year Ending January 31,had the Following