Reference no: EM132562543

Question - Nishi Corporation prepares financial statements for each month-end. As part of its accounting process, estimated income taxes are accrued each month for 30% of the current month's net income. The income taxes are paid in the first month of each quarter for the amount accrued for the prior quarter. The following information is available for the fourth quarter of the year just ended. When tax computations are completed on January 20 of the following year, Nishi determines that the quarter's Income Taxes Payable account balance should be $44,695 on December 31 of the year just ended (its unadjusted balance is $40,395).

October net income $49,000

November net income 31,850

December net income 53,800

Required -

1. Determine the amount of the accounting adjustment (dated as of December 31) to get the correct ending balance in the Income Taxes Payable account.

2. Prepare journal entries to record (a) the December 31 adjustment to the Income Taxes Payable account and (b) the later January 20 payment of the fourth-quarter taxes.