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AICPA CPA-Financial Exam - Topic 2 Question 121 Discussion

During the first quarter of 1993, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Tech's 1992 effective annual income tax rate was 30%, but Tech expects its 1993 effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of income tax expense should Tech report?
C) $50,000
A) $0
D) $60,000
B) $30,000

AICPA CPA-Financial Exam - Topic 2 Question 121 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 121
Topic #: 2
[All CPA-Financial Questions]

During the first quarter of 1993, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Tech's 1992 effective annual income tax rate was 30%, but Tech expects its 1993 effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of income tax expense should Tech report?

Show Suggested Answer Hide Answer
Suggested Answer: C

Choice 'c' is correct. Interim period tax expense is the estimated annual effective tax rate (25% in this case) applied to the year-to-date income before taxes minus the tax expense recognized in previous interim periods. Since this question involves the first quarter, there are no previous interim periods. 25% $200,000 = $50,000. FIN 18, para. 16

Choice 'a' is incorrect. Income tax expense is reported in interim income statements.

Choice 'b' is incorrect. The 1993 annual estimated tax rate, not the first quarter effective tax rate, is used to calculate income tax expense for interim statements.

Choice 'd' is incorrect. The 1993 annual estimated tax rate, not the 1992 annual effective tax rate, is used to calculate income tax expense for interim statements.


by Janet at Jan 26, 2026, 11:05 PM

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Nicholle
But remember, it was 15% for the quarter. Should we consider that too?
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Ronald
5 days ago
So, $200,000 times 25% equals $50,000 for tax expense.
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Emmanuel
10 days ago
Right! We need to use the effective rate for 1993, which is 25%.
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Teddy
15 days ago
This question is tricky. I think they want us to calculate the tax expense for the quarter.
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France
2 months ago
Definitely agree, $30k sounds accurate based on those rates.
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Delsie
2 months ago
Wait, so they went from 30% to 15%? That’s a huge change!
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Silva
2 months ago
Seems right, but I wonder if they'll stick to that 25% for the whole year.
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Erick
3 months ago
I thought the rate was higher last year, interesting drop!
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Josphine
3 months ago
Income tax expense for Q1 should be $30,000.
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Marge
3 months ago
Haha, I bet the tax accountants at Tech Co. are really earning their paychecks this quarter!
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Willodean
3 months ago
$50,000 is the correct answer. The question gives us all the info we need.
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Linsey
3 months ago
Hmm, I think I need to double-check the calculations on this one to be sure.
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Frederica
3 months ago
I'm not sure about this one. The changing tax rates make it a bit tricky.
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Raul
4 months ago
$50,000 seems like the right answer based on the information provided.
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Isidra
4 months ago
I’m a bit confused about whether we should consider the previous year's rate or just focus on the current expectations. I feel like both rates might play a role in the calculation.
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Shawnda
4 months ago
This question reminds me of a practice problem where we had to adjust the tax expense based on changes in the effective tax rate. I think we should calculate it using the expected annual rate of 25%.
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Azalee
5 months ago
I think we might need to apply the 15% rate for the first quarter since that's the effective rate for that period, but I’m not completely sure how to adjust for the annual rate.
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Jamal
5 months ago
I remember we discussed how to calculate the income tax expense based on the effective tax rate, but I'm unsure if we should use the quarterly rate or the annual rate.
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Maryann
5 months ago
I got this! Just need to plug in the numbers and do the math. Confident I can get the right answer.
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Jaime
5 months ago
This seems straightforward, but I want to double-check my work. Don't want to make any silly mistakes on the exam.
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Cassi
5 months ago
Okay, let's break this down step-by-step. First, find the income before taxes, then apply the expected 1993 effective tax rate.
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Malcom
6 months ago
Hmm, not sure I fully understand how to apply the different effective tax rates here. Might need to review the concepts again.
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Jeannetta
6 months ago
I think I can handle this. Just need to calculate the income tax expense based on the given information.
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