Hops estimates its annual warranty expense as a percentage, Ask an Expert

Accounting

The following information is available for Hops Company after its first year of operations:

Income before taxes $250,000
Federal income tax payable $104,000
Deferred income tax (4,000)
Income tax expense 100,000
Net income $150,000

Hops estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $105,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

a. $100,000

b. $95,000

c. $85,000

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M995253

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