LESSON 14-6 Calculating Federal Income Tax and Completing a Work Sheet 4/23/2017 LESSON 14-6 Calculating Federal Income Tax and Completing a Work Sheet

Calculating Federal Income Tax Corporations anticipating annual federal income taxes of $500 or more are required to pay their estimated taxes each quarter The actual federal income tax owed is calculated at the end of a fiscal year Federal income tax is an expense of a corporation. However, the amount of tax depends on net income before the tax is recorded. Before making adjustments to federal income tax, businesses must first determine the net income BEFORE federal income tax expense LESSON 14-6

FEDERAL INCOME TAX EXPENSE ADJUSTMENT page 427 Complete all other adjustments on a work sheet Extend all amounts except Federal Income Tax Expense to the Income Statement or Balance Sheet columns On a separate sheet of paper, total the worksheet’s Income Statement columns Calculate the difference between the Income Statement Debit & Credit column totals. This is the net income before federal income tax expense Total of Income Statement Credit column $ 500,253.10 Less total of Income Statement Debit column before federal income tax –396,049.91 Equals Net Income before Federal Income Tax $ 104,203.19 LESSON 14-6

CALCULATING FEDERAL INCOME TAX page 428 The amount of federal income tax expense a corporation must pay is calculated using a tax rate table furnished by the Internal Revenue Service. LESSON 14-6

RECORDING THE FEDERAL INCOME TAX ADJUSTMENT page 429 1 3 2 1. Calculate the amount of federal income tax expense adjustment. 2. Total and rule the Adjustments columns. 3. Extend account balances. LESSON 14-6

COMPLETING A WORK SHEET page 430 1 2 3 4 5 1. Total the Income Statement and Balance Sheet columns. 2. Calculate and enter the net income after federal income tax. 3. Extend the net income amount. 4. Calculate the column totals. 5. Rule double lines. LESSON 14-6

A COMPLETED 8-COLUMN WORK SHEET page 432 LESSON 14-6

A 10-COLUMN WORK SHEET 1 2 3 5 4 6 1. Trial balance 5. Extend balances page 434-435 1 2 3 5 4 6 1. Trial balance 5. Extend balances 2. Adjustments 6. Calculate net income; total, prove and rule 3. Extend adjusted balances 4. Total, prove, and rule LESSON 14-6