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Winter Gear, Inc. started business on January 1, 20X1. The company uses the income statement approach to estimating bad debts. The company incorrectly used the

Winter Gear, Inc. started business on January 1, 20X1. The company uses the income statement approach to estimating bad debts. The company incorrectly used the actual write-off of the receivable for the recorded bad debt expense in the below income statement.

Credit sales $678,000
Bad debt expense as a percentage of sales 2%
Write-off of accounts receivable $1,000
Tax rate 30%
Estimated tax payment $31,000

Incorrect income statement, for the year ended December 31:

Sales $678,000
Expenses 549,200
Bad debt expense 1,000
Pretax income 127,800
Tax expense 38,340
Net income 89,460

Assuming estimated tax payment of $31,000 what is ending balance in taxes payable in 20X1 on the balance sheet?

Note: The income statement (book) uses an estimated bad debt expense amount, but the tax return uses the actual write-off amount. Taxes payable is based on the tax return. Complete an M-1 or mini-tax return to determine the tax liability. Don't forget about the estimated tax payment.

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