Shrunk Inc. has recorded all necessary adjusting entries, except for income tax expense, at its fiscal year end, July 31, 2021. The following information has been taken from the adjusted trial balance:

All accounts have normal balances and total assets equal $817,500. Shrunk has a 20% income tax rate.

Instructions

Prepare a multiple-step income statement and the required journal entry to adjust income tax expense.

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Accounts payable Cash dividends-common Common shares Cost of goods sold Dividends payable Income tax expense Income tax payable Interest expense Notes payable Retained earnings (Aug. 1, 2020) Salaries expense Sales Supplies expense Unearned revenue $ 5,000 100,000 352,000 140,000 665,000 $ 25,500 60,000 200,000 310,000 15,000 10,000 3,000 12,000