127.Commander Appliance Store prepares annual financial statements and at December 31, 2016. Commander needs to analyze the following items to determine the whether adjusting entries are required for 2016.
1. Twenty-two employees worked during 2016 and each of them will take two weeks of vacation in 2017. Twelve of these employees earn $500 per week and 10 employees earn $800 per week. (If an adjusting entry is required, ignore payroll taxes on this item.)
2. Office rent for January, 2017 has not yet been paid.
3. Commander sold 3,000 coffee brewing machines for total sales of $150,000. Commander expects that 30 machines will need warranty repairs in the next two years and estimates the cost of repairs to be $2,400.
4. Commander has been sued by a customer and assesses the probability of losing the lawsuit to be reasonably possible. The estimate of the contingency loss is $20,000.
For each item listed, determine whether there should be an accrual and adjusting entry at December 31, 2016. If so, then prepare the adjusting entry. If not, state the reason for not accruing a liability.
128.A company's income statement reported net income of $80,000 during 2016. The income tax return excluded a revenue item of $10,000 (reported on the income statement) because under the tax laws the $10,000 would not be reported for tax purposes until 2017.
Prepare the journal entry to record the 2016 income tax expense assuming a 40% tax rate.
129.A company's income statement reported income tax expense of $200,000 during 2016. The deferred tax liability on the balance sheet increased $20,000 during 2016. How much was the company's tax liability during 2016?
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