century 21 accounting © thomson/south-western lesson 14-6 calculating federal income tax and...
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CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 14-6LESSON 14-6
Calculating Federal Income Tax and Completing a Work Sheet
CENTURY 21 ACCOUNTING © Thomson/South-Western
Calculating Federal Income TaxCalculating 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
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LESSON 14-6
CENTURY 21 ACCOUNTING © Thomson/South-Western
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LESSON 14-6
FEDERAL INCOME TAX EXPENSE FEDERAL INCOME TAX EXPENSE ADJUSTMENTADJUSTMENT page 427
Total of Income Statement Credit column $
500,253.10Less total of Income Statement Debit column
before federal income tax–
396,049.91Equals Net Income before Federal Income Tax $
104,203.19
1. Complete all other adjustments on a work sheet2. Extend all amounts except Federal Income Tax Expense
to the Income Statement or Balance Sheet columns3. On a separate sheet of paper, total the worksheet’s
Income Statement columns4. Calculate the difference between the Income Statement
Debit & Credit column totals. This is the net income before federal income tax expense
CENTURY 21 ACCOUNTING © Thomson/South-Western
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LESSON 14-6
CALCULATING FEDERAL INCOME TAXCALCULATING 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.
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LESSON 14-6
1. Calculate the amount of federal income tax expense adjustment.
RECORDING THE FEDERAL INCOME TAX RECORDING THE FEDERAL INCOME TAX ADJUSTMENTADJUSTMENT
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page 429
2. Total and rule the Adjustments columns.
3. Extend account balances.
CENTURY 21 ACCOUNTING © Thomson/South-Western
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LESSON 14-6
COMPLETING A WORK SHEETCOMPLETING A WORK SHEET
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page 430
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1. Total the Income Statement and Balance Sheet columns.
5. Rule double lines.
4. Calculate the column totals.
3. Extend the net income amount.
2. Calculate and enter the net income after federal income tax.
CENTURY 21 ACCOUNTING © Thomson/South-Western
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LESSON 14-6
A COMPLETED 8-COLUMN A COMPLETED 8-COLUMN WORK SHEETWORK SHEET page 432
CENTURY 21 ACCOUNTING © Thomson/South-Western
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LESSON 14-6
A 10-COLUMN WORK SHEETA 10-COLUMN WORK SHEET page 434-435
1. Trial balance
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5. Extend balances
2. Adjustments
3. Extend adjusted balances
4. Total, prove, and rule
6. Calculate net income; total, prove and rule
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