Lesson 14-1

```LESSON 14-6
Calculating Federal
Income Tax and
Completing a Work Sheet
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
2
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
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
LESSON 14-6
3
FEDERAL INCOME TAX EXPENSE
page 427
1. Complete all other adjustments on a work sheet
2. Extend all amounts except Federal Income Tax Expense
to the Income Statement or Balance Sheet columns
3. On a separate sheet of paper, total the worksheet’s
Income Statement columns
4. Calculate the difference between the Income Statement
Debit &amp; Credit column totals. This is the net income
before federal income tax expense
Total of Income Statement Credit column
Less total of Income Statement Debit column
before federal income tax
Equals Net Income before Federal Income Tax
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
\$ 500,253.10
–396,049.91
\$ 104,203.19
LESSON 14-6
4
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.
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
LESSON 14-6
5
RECORDING THE FEDERAL INCOME TAX
page 429
3
1
1
1. Calculate the amount
of federal income tax
2
3
2. Total and rule the Adjustments
columns.
3. Extend account balances.
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
LESSON 14-6
6
COMPLETING A WORK SHEET
page 430
1
1
2
4
1.
2.
3.
4.
5.
5
3
Total the Income Statement and Balance Sheet columns.
Calculate and enter the net income after federal income tax.
Extend the net income amount.
Calculate the column totals.
Rule double lines.
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
LESSON 14-6
7
A COMPLETED 8-COLUMN
WORK SHEET
CENTURY 21 ACCOUNTING &copy; Thomson/South-Western
page 432
LESSON 14-6
8
A 10-COLUMN WORK SHEET
1
2
3
page 434-435
5
4
6
1.
2.
3.
4.
Trial balance