# At the end of the second quarter of 20X1, Malta Corporation assembled the following information: The...

###### Question:

At the end of the second quarter of 20X1, Malta Corporation assembled the following information:

1. The first quarter resulted in a $106,000 loss before taxes. During the second quarter, sales were$1,216,000; purchases were $666,000; and operating expenses were$336,000.
2. Cost of goods sold is determined using the FIFO method. The inventory at the end of the first quarter was reduced by $20,000 to a lower-of-cost-or-market figure of$94,000. During the second quarter, replacement costs recovered, and by the end of the period, market value exceeded the ending inventory cost by $17,250. 3. The ending inventory is estimated using the gross profit method. The estimated gross profit rate is 46 percent. 4. At the end of the first quarter, the effective annual tax rate was estimated at 45 percent. At the end of the second quarter, expected annual income is$640,000. An investment tax credit of $15,000 and dividends received deduction of$82,500 are expected for the year. The combined state and federal tax rate is 40 percent.
5. The tax benefits from operating losses are assured beyond a reasonable doubt. Prior-years income totaling $50,000 is available for operating loss carrybacks. Required: a. Calculate the expected effective annual tax rate at the end of the second quarter for Malta. (Round your answer to 1 decimal place.) Answer is complete and correct. Estimated effective annual tax rate 32.5 % b. Prepare the income statement for the second quarter of 20X1. Your solution should include a computation of income tax (or benefit) for the first and second quarters. (Negative amounts should be entered with minus sign. Round your percentage answers to 1 decimal place.) Answer is not complete. MALTA CORPORATION Income Statement For Three Months Ended June 30, 20X1 1,216,000 Sales Cost of goods sold: MALIA CORPORATION Income Statement For Three Months Ended June 30, 20X1 Sales 1,216,000 Cost of goods sold: Beginning inventory$ 94,000 Purchases 666,000 $760,000 Goods available Ending inventory$ 760,000 20,000 Recovery from LCM Gross profit Operating expense Income before taxes $740,000$ 476,000 336,000 $140,000 Income taxes Net income$ 140,000 Answer is not complete. Income (Loss) Before Taxes Tax (Benefit) Period Period Current Period ce Estimated Effective Annual Tax Rate nte Year- to-date reacties Aanhante Year- to-date Yearte Less Previously Provided 0 previously Reported in this Period report 45.0 32.5 % %

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