Chris Inc. has accumulated the following information for its second-quarter income statement for 20X2: Sales Cost of goods sold Operating expenses $856,000 426,000 236,000 Additional Information 1. First-quarter income before taxes was $106,000, and the estimated effective annual tax rate was 40 percent. At the end of the second quarter, expected annual income is $640,000, and a dividend exclusion of $34,000 and a business tax credit of $15,000 are anticipated. The combined state and federal tax rate is 50 percent. 2. The $426,000 cost of goods sold is determined by using the LIFO method and includes 7,500 units from the base layer at a cost of $12 per unit. However, you have determined that these units are expected to be replaced at a cost of $26 per unit. 3. The operating expenses of $236,000 include a $66,000 factory rearrangement cost incurred in April. You have determined that the second quarter will receive about 25 percent of the benefits from this project with the remainder benefiting the third and fourth quarters. Required: a. Calculate the effective annual tax rate expected at the end of the second quarter for Chris Inc. Estimated effective annual tax rate 45% b. Prepare the income statement for the second quarter of 20X2. Your solution should include a computation of income tax (or benefit): b. Prepare the income statement for the second quarter of 20x2. Your solution should include a computation of income tax (or benefit): CHRIS, INC. Income Statement For Three Months Ended June 30, 20X2 Sales $ 856,000 Cost of goods sold 426,000 Gross profit $ $ 430,000 Operating expense 186,500 Income before taxes $ 243,500 Income taxes Net income $ 243,500 Income (Loss) Before Taxes ) Estimated Effective Annual Tax Rate Interim Period Tax (Benefit) Less Previously Provided Current Period Year to Date Year to Date Reported in this period 1 106,000 40 % 106,000 243,5001 2 45 %