How do the all events and economic performance requirement apply to the following transactions by an accrual...

70.2K

Verified Solution

Question

Accounting

How do the all events and economic performance requirement applyto the
following transactions by an accrual basis taxpayer?
a. The company guarantees its products for six months. At theend of 2018, customers
had made valid claims for $600,000 that were not paid until2019. Also,
the company estimates that another $400,000 in claims from 2018sales will be
filed and paid in 2019.
b. The accrual basis taxpayer reported $200,000 in corporatetaxable income for
2018. The state income tax rate was 6%. The corporation paid$7,000 in estimated
state income taxes in 2018 and paid $2,000 on 2017 state incometaxes
when it filed its 2017 state income tax return in March 2018.The company filed
its 2018 state income tax return in March 2019 and paid theremaining $5,000
of its 2018 state income tax liability.
c. An employee was involved in an accident while making a salescall. The company
paid the injured victim $15 ,000 in 2018 and agreed to pay thevictim
S 15,000 a year for the next nine years.

Answer & Explanation Solved by verified expert

4.0 Ratings (606 Votes)

Part A The allevents test is satisfied when the customer makes a claim The claim obligates the company to pay the customer Economic performance is not satisfied until the customer is paid Under the recurring item See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

How do the all events and economic performance requirement applyto thefollowing transactions by an accrual basis taxpayer?a. The company guarantees its products for six months. At theend of 2018, customershad made valid claims for $600,000 that were not paid until2019. Also,the company estimates that another $400,000 in claims from 2018sales will befiled and paid in 2019.b. The accrual basis taxpayer reported $200,000 in corporatetaxable income for2018. The state income tax rate was 6%. The corporation paid$7,000 in estimatedstate income taxes in 2018 and paid $2,000 on 2017 state incometaxeswhen it filed its 2017 state income tax return in March 2018.The company filedits 2018 state income tax return in March 2019 and paid theremaining $5,000of its 2018 state income tax liability.c. An employee was involved in an accident while making a salescall. The companypaid the injured victim $15 ,000 in 2018 and agreed to pay thevictimS 15,000 a year for the next nine years.