Make all 16 adjustments on the "Adjusting Journal Entries" tab. Remember to include a description under each journal entry Post the adjustments to the general ledger on the "12-31-14 T-Accounts" tab. You may have to add T-Accounts for new accounts Link your T-Account entries to your Joumal Entries. PLEASE NOTE THAT THE "BB" BEGINNING BALANCES) FOR THE T.ACCOUNTS REPRESENT THE UNADJUSTED BALANCES AS OF 12/31/14. Once the 12/31/14 T.Accounts are complete, prepare the Adjusted Trial Balance. There may be some accounts with zelo dollars, and you may have to insert lines for new accounts (some blank T-Accounts have already been provided for you). Link the Adjusted Trial Balance to your T-Accounts. Use the Adjusted Trial Balance members to complete the Income Statement, Statement of Retained Eating, Balance Sheet, and Statement of Cash Flows. For purposes of the Income Statement, prepare using the multiple step.format and assume that Rent Revenue, any Unrealized Holding Gaica/Loses, Interest Expense, Interest Revenue, and any other Gains/Lones are NOT part of the major centual ongoing operation of the company. Link your financial statements to your Adjusted Trial Balance. Use the Income Statement and Balance Sheet to finish the partially completed Statement of Cash Flows. Since this is ABC's first year of operations.several line items on the Statement of Cash Flows have already been supplied to you If necessary, review financial statement preparation in Chapters 4 and 5 of your textbook for a quick refresher. Plan on using your knowledge gained in completing Chapter 21 to help with the preparation of the Statement of Cash Flows. Additionally, since this is ABC Corporation's first year of operation he adjusted trial balance for all current assets and liabilities represents the change during the year for Statement of Cash Flows analysis purposes ructions Unadjusted Trial Balance Adjustments Needed Adjusting Journal Entries 12-31-14 TAG Adjusted Trial income When the Financial Statements are complete, make the closing entries on the "Closing Entries" tab being mindful of the two closing entries you've learned When closing entries lave been made, post the entries to the general ledger on the "Post-Close T Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12.31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name. The final step is the Post-Closing Trial Balance, which will use the ending balances from the 12/31/14 T-Accounts after posting your closing entries. Double-check your work. Here are a few things to check for Adjusted Trial Balance: Make sure debit column and credit column total to the same figure at the bottom. Net income from the income statement will flow through to the Statement of Retained Earnings -Ending Retained Earnings from the Statement of Retained Eamings will flow through to the Balance Sheet Ending Cash balance from the Balance Sheet should match your ending Cash balance on the Statement of Cash Flows. The Post Closing Trial Balance should not have any revenue, expense, gain, loss, or other temporacy accounts. -Check figure 1: Income from operations = $594,336 -Check figure 2. Total Current Assets = $1,464,429. Adustments Needed Adjusting Journal Entries Adjusted Trial Balance uctions Unadjusted Trial Balance 12-11-14 T-Accounts (GL) 10:17 4 t AC 323 Comprehensive Prob... Instructions Unadjusted Trial Balance ABC Corporation Unadjusted Trial Balance December 31, 2014 Credit Debit 975.232 167.000 0 190.000 Cash Short term investments Fair value adjustment (Trading) Accounts receivable Allowance for doubtful accounts Inventory Purchases Prepaid insurance LT (Debt) investments (HTM) Land Building Accumulated depreciation building Equipment Accumulated depreciation equipment 0 350.000 24.600 177.834 75.000 150.000 4.000 60.000 20,000 Patient 37.500 75.340 235.000 63. DO 36.000 800.000 61,771 86.000 13.000 0 Accounts payable Notes payable Income taxes payable Uneamed rent revenue Bonds Payable Premium on Bonds Payable Common stock PIC In Excess of Par-Common Stock Retained camnings Treasury stock Dividends Sales Revenue Advertising expense Wages expense Office expense Amortization expense Depreciation expense Utilities expense Insurance expense Income taxes expense 49,000 41.000 1.192.945 8.400 67.600 21.700 0 24.000 31.000 73.800 63 00 2.587.756 2.587.756 1 On March 1, ABC purchased a one-year liability insurance policy for $98,400. Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14. Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entry is correct. 2 Depreciation expense must be recorded for the month of December. The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight- line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double- declining balance. Depreciation has been recorded for the building and equipment for months February through November. 3 On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December 1 was as follows: Dr Cash 36,000 Cr Unearned rent revenue 36,000 The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14. 4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14. 5 On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item) Dr Cash 235,000 Cr Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note. 6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $75,000, which reflects historical cost. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level. A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting for adjustments of inventory to market value. 7 It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock. 9 On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price of $7 per share. Prepare ABC's journal entry to reflect the issuance of the stock on 12/31/14. 10 On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in On effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14 Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense. 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. Securities Cost Fair Value 2,200 shares of Toyota Corporation Common Stock $100,000 $125,000 1,100 shares of G.M. Corporation Common Stock $67,000 $34,000 $167,000 $159,000 Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading. 12 On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824, which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to investment account. 13 ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, prepare the entry to record bad debt expense. 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation amortizes the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. After determining the type of lease arrangement (financing or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.) 15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014. Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry. Pension asset/liability (January 1) $0 Actual return on plan assets $40,000 Expected return on plan assets $20,000 Contributions (funding) in 2014 $37,000 Fair value of plan assets (December 31) $75,000 Settlement rate 10% Projected benefit obligation (January 1) $0 Service cost $60,000 Benefits paid in 2014 $0 *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. 16 On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of $10 per share on December 31, 2014. Additional information is as follows: a. The service period related to the restricted stock is 2 years. b. Vesting occurs if the CFO stays with the company for a two-year period. c. The par value of the common stock is $3 per share. Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation. Do this step after preparing the Income Statement except for the income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense) 17 Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full on the return's March 15, 2015 due date. ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600, so January through November income tax expense recognized amounts to $63,800 (11/12 months). Since we are assuming estimates are not made during the year the balance in Income taxes payable represents tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. Based on the income before income taxes figure from the income statement, record December's income tax expense so that the entire year's total tax expense is correct. Make all 16 adjustments on the "Adjusting Journal Entries" tab. Remember to include a description under each journal entry Post the adjustments to the general ledger on the "12-31-14 T-Accounts" tab. You may have to add T-Accounts for new accounts Link your T-Account entries to your Joumal Entries. PLEASE NOTE THAT THE "BB" BEGINNING BALANCES) FOR THE T.ACCOUNTS REPRESENT THE UNADJUSTED BALANCES AS OF 12/31/14. Once the 12/31/14 T.Accounts are complete, prepare the Adjusted Trial Balance. There may be some accounts with zelo dollars, and you may have to insert lines for new accounts (some blank T-Accounts have already been provided for you). Link the Adjusted Trial Balance to your T-Accounts. Use the Adjusted Trial Balance members to complete the Income Statement, Statement of Retained Eating, Balance Sheet, and Statement of Cash Flows. For purposes of the Income Statement, prepare using the multiple step.format and assume that Rent Revenue, any Unrealized Holding Gaica/Loses, Interest Expense, Interest Revenue, and any other Gains/Lones are NOT part of the major centual ongoing operation of the company. Link your financial statements to your Adjusted Trial Balance. Use the Income Statement and Balance Sheet to finish the partially completed Statement of Cash Flows. Since this is ABC's first year of operations.several line items on the Statement of Cash Flows have already been supplied to you If necessary, review financial statement preparation in Chapters 4 and 5 of your textbook for a quick refresher. Plan on using your knowledge gained in completing Chapter 21 to help with the preparation of the Statement of Cash Flows. Additionally, since this is ABC Corporation's first year of operation he adjusted trial balance for all current assets and liabilities represents the change during the year for Statement of Cash Flows analysis purposes ructions Unadjusted Trial Balance Adjustments Needed Adjusting Journal Entries 12-31-14 TAG Adjusted Trial income When the Financial Statements are complete, make the closing entries on the "Closing Entries" tab being mindful of the two closing entries you've learned When closing entries lave been made, post the entries to the general ledger on the "Post-Close T Accounts" tab. Make sure your adjusting journal entries are also posted on your Post-Close T-Accounts. They will not automatically flow from tab-to-tab. Suggestion: As an alternative, after you've finished posting your adjusting journal entries to the accounts in the "12.31-14 T Accounts" tab, make a duplicate of this worksheet to use for posting your closing entries and then just relabel the tab as "Post-Close T-Accounts." Just be sure to delete the original Post-Close T-Accounts" tab already in the workbook before you do this since you can't have two worksheets with the same name. The final step is the Post-Closing Trial Balance, which will use the ending balances from the 12/31/14 T-Accounts after posting your closing entries. Double-check your work. Here are a few things to check for Adjusted Trial Balance: Make sure debit column and credit column total to the same figure at the bottom. Net income from the income statement will flow through to the Statement of Retained Earnings -Ending Retained Earnings from the Statement of Retained Eamings will flow through to the Balance Sheet Ending Cash balance from the Balance Sheet should match your ending Cash balance on the Statement of Cash Flows. The Post Closing Trial Balance should not have any revenue, expense, gain, loss, or other temporacy accounts. -Check figure 1: Income from operations = $594,336 -Check figure 2. Total Current Assets = $1,464,429. Adustments Needed Adjusting Journal Entries Adjusted Trial Balance uctions Unadjusted Trial Balance 12-11-14 T-Accounts (GL) 10:17 4 t AC 323 Comprehensive Prob... Instructions Unadjusted Trial Balance ABC Corporation Unadjusted Trial Balance December 31, 2014 Credit Debit 975.232 167.000 0 190.000 Cash Short term investments Fair value adjustment (Trading) Accounts receivable Allowance for doubtful accounts Inventory Purchases Prepaid insurance LT (Debt) investments (HTM) Land Building Accumulated depreciation building Equipment Accumulated depreciation equipment 0 350.000 24.600 177.834 75.000 150.000 4.000 60.000 20,000 Patient 37.500 75.340 235.000 63. DO 36.000 800.000 61,771 86.000 13.000 0 Accounts payable Notes payable Income taxes payable Uneamed rent revenue Bonds Payable Premium on Bonds Payable Common stock PIC In Excess of Par-Common Stock Retained camnings Treasury stock Dividends Sales Revenue Advertising expense Wages expense Office expense Amortization expense Depreciation expense Utilities expense Insurance expense Income taxes expense 49,000 41.000 1.192.945 8.400 67.600 21.700 0 24.000 31.000 73.800 63 00 2.587.756 2.587.756 1 On March 1, ABC purchased a one-year liability insurance policy for $98,400. Upon purchase, the following journal entry was made: Dr Prepaid insurance 98,400 Cr Cash 98,400 The expired portion of insurance must be recorded as of 12/31/14. Notice that the expired portion from March through November has been recorded already. Make sure that the Prepaid Insurance balance after the adjusting entry is correct. 2 Depreciation expense must be recorded for the month of December. The building was purchased with cash on February 1, 2014 for $150,000 with a remaining useful life of 30 years and a salvage value of $6,000. The method of depreciation for the building is straight- line. The equipment was purchased with cash on February 1, 2014 for $60,000 with a remaining useful life of 5 years and a salvage value of $3,000. The method of depreciation for the equipment is double- declining balance. Depreciation has been recorded for the building and equipment for months February through November. 3 On December 1, XYZ Co. agreed to rent space in ABC's building for $12,000 per month, and XYZ paid ABC on December 1 in advance for the first three months' rent. The entry made on December 1 was as follows: Dr Cash 36,000 Cr Unearned rent revenue 36,000 The unearned revenue account must be adjusted to reflect the amount earned as of 12/31/14. 4 Per timecards, from the last payroll date through December 31, 2014, ABC's employees have worked a total of 250 hours. Including payroll taxes, ABC's wage expense averages about $51 per hour. The next payroll date is January 5, 2015. The liability for wages payable must be recorded as of 12/31/14. 5 On November 30, 2014, ABC borrowed $235,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2015), along with interest computed at an annual rate of 6%. The entry made on November 30 to record the borrowing was: (for Statement of Cash Flow purposes, consider a financing item) Dr Cash 235,000 Cr Notes payable 235,000 On February 28, 2015 ABC must pay the bank the amount borrowed plus interest. Assume the beginning balance for Notes Payable is correct. Interest through 12/31/14 must be accrued on the $235,000 note. 6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at that time totaled $75,000, which reflects historical cost. Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level. A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of completion and shipping is 15% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting for adjustments of inventory to market value. 7 It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 8 On 7/1/14, ABC purchased 7,000 shares of its own stock from existing stockholders as treasury stock. The cost of the treasury stock was $7 per share, or $49,000 in total. The effects of this transaction are already shown in the unadjusted trial balance. On 12/31/14, ABC reissued these 7,000 shares of treasury stock at $10 per share. Record the journal entry required for the reissuance of the treasury stock. 9 On 12/31/14, ABC issued 5,000 shares of $3 par value common stock at the closing market price of $7 per share. Prepare ABC's journal entry to reflect the issuance of the stock on 12/31/14. 10 On 7/1/14, ABC sold 12% bonds having a maturity value of $800,000 for $861,771, resulting in On effective yield of 10%. The bonds are dated 7/1/14, and mature 7/1/19. Interest is payable semiannually on July 1 and January 1. ABC uses the effective interest method of amortization for bond premium or discount. Record the adjusting entry for the accrual of interest and the related amortization on 12/31/14 Hint: Develop an abbreviated amortization schedule to accurately determine the interest expense. 11 The following information is available for ABC Corporation at 12/31/14 regarding its investments in stocks of other companies. Securities Cost Fair Value 2,200 shares of Toyota Corporation Common Stock $100,000 $125,000 1,100 shares of G.M. Corporation Common Stock $67,000 $34,000 $167,000 $159,000 Prepare the adjusting entry (if any) for 2014, assuming the securities are classified as trading. 12 On 1/1/14, ABC Corporation purchased, as a held-to-maturity investment, $200,000 of the 8%, 5-year bonds of Intuit Corporation for $177,824, which provides an 11% return. Prepare ABC's 12/31/14 journal entry to reflect the receipt of annual interest and discount amortization. Assume the bond investment pays interest annually on 12/31 each year and that effective interest amortization is used. Note: Notice that a discount account is not used for this investment. Therefore, for purposes of this adjusting entry, amortize the discount directly to investment account. 13 ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, prepare the entry to record bad debt expense. 14 On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation amortizes the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. After determining the type of lease arrangement (financing or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.) 15 ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension plan given the following items of information for the 2014 plan year, including the recording of pension expense and the employer's contribution to the pension plan in 2014. Note: Use the summary entry method as demonstrated and discussed in the chapter lectures on pension accounting to prepare the adjusting entry. Pension asset/liability (January 1) $0 Actual return on plan assets $40,000 Expected return on plan assets $20,000 Contributions (funding) in 2014 $37,000 Fair value of plan assets (December 31) $75,000 Settlement rate 10% Projected benefit obligation (January 1) $0 Service cost $60,000 Benefits paid in 2014 $0 *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. 16 On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of $10 per share on December 31, 2014. Additional information is as follows: a. The service period related to the restricted stock is 2 years. b. Vesting occurs if the CFO stays with the company for a two-year period. c. The par value of the common stock is $3 per share. Make the appropriate accounting entry as of the grant date, 12/31/14. Note: use the alternative method as described in your textbook for deferred compensation. Do this step after preparing the Income Statement except for the income taxes line: (You need to calculate Income Before Income Taxes in order to calcualte total Income Tax Expense) 17 Corporate taxes are due in four estimated quarterly payments on April 15, June 15, September 15, and December 15. However, for the purposes of this ABC illustration, we will assume that estimates are not paid, and that the tax is paid in full on the return's March 15, 2015 due date. ABC's income tax rate is 40%. The entire year's income tax expense was estimated at the beginning of 2014 to be $69,600, so January through November income tax expense recognized amounts to $63,800 (11/12 months). Since we are assuming estimates are not made during the year the balance in Income taxes payable represents tax accrued for January through November. Assume no deferred tax assets or deferred tax liabilities. Based on the income before income taxes figure from the income statement, record December's income tax expense so that the entire year's total tax expense is correct