Exercise 16-19 (Algorithmic) (LO. 1) Gaffey Corporation obtained permission to c

Question

Exercise 16-19 (Algorithmic) (LO. 1) Gaffey Corporation obtained permission to change from a calendar year to a fiscal year ending May 31, beginning in 2017. For the short period January 1 through May 31, 2017, the corporation's taxable income was $213,400. For computing the tax, assume a tax rate of 25%. Do not round interim computations but round your final answers to the nearest dollar. Gaffey Corporation's annualized short period income is tax is and the converted tax on the annualized income to a short period

Explanation / Answer

Taxable income for the period of five months (Jan to May) was $213,400

Annualised income is 213400 x 12 / 5 = 512,160

Annualised short period income is $512,160

Tax on annualised income is $512160 x 25% = $128,040

Short period tax is 128040 x 5 / 12 = $53,350

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