hw chap 19-21

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HW CHAP 19 1. In 2020, Novak Corporation had pretax financial income of $181,000 and taxable income of $108,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 20%. Compute the amount to be reported as income taxes payable at December 31, 2020. Income taxes payable at December 31, 2020 21600 2. Stellar Corporation began operations in 2020 and reported pretax financial income of $206,000 for the year. Stellar ’s tax depreciation exceeded its book depreciation by $33,000. Stellar ’s tax rate for 2020 and years thereafter is 30%. In its December 31, 2020, balance sheet, what amount of deferred tax liability should be reported? Deferred tax liability to be reported 9900 3. At December 31, 2020, Cheyenne Inc. had a deferred tax asset of $32,600. At December 31, 2021, the deferred tax asset is $57,300 . The corporation’s 2021 current tax expense is $ 62,200. What amount should Cheyenne report as total 2021 income tax expense? Total income tax expense for 2021 37500
4. Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. For each item below, indicate whether it involves: 1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent difference.
5. Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes. For each item below, indicate whether it involves: 1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent difference. Use the appropriate number to indicate your answer for each.
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6. Complete the following statements by filling in the blanks. a . In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be greater than pretax financial income. b. If a $74,800 balance in Deferred Tax Asset was computed by use of a 40% rate, the underlying cumulative temporary difference amounts to 187000 c. Deferred taxes are not recorded to account for permanent differences. d. If a taxable temporary difference originates in 2020, it will cause taxable income for 2020 to be less than pretax financial income for 2020 e. If total tax expense is $47,800 and deferred tax expense is $63,100, then the current portion of the expense computation is referred to as current tax benefit of $ 15300 f. If a corporation’s tax return shows taxable income of $102,100 for Year 2 and a tax rate of 40%, how much will appear on the December 31, Year 2, balance sheet for “Income taxes payable” if th e company has made estimated tax payments of $35,400 for Year 2? $ 5440 g. An increase in the Deferred Tax Liability account on the balance sheet is recorded by a debit to the Income Tax Expense account.
h. An income statement that reports current tax expense of $81,400 and deferred tax benefit of $22,600 will report total income tax expense of 58800 i. A valuation account is needed whenever it is judged to be more likely than not that a portion of a deferred tax asset will not be realized. j. If the tax return shows total taxes due for the period of $76,300 but the income statement shows total income tax expense of $55,600, the difference of $20,700 is referred to as deferred tax benefit. 7. At the end of 2019, Swifty Company has $182,500 of cumulative temporary differences that will result in reporting the following future taxable amounts. 2020 $59,100 2021 50,200 2022 42,000 2023 31,200 $182,500 Tax rates enacted as of the beginning of 2018 are: 2018 and 2019 40 % 2020 and 2021 30 %
2022 and later 25 % Swifty’s taxable income for 2019 is $314,700. Taxable income is expected in all future years. (a) Prepare the journal entry for Swifty to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there were no deferred taxes at the end of 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (b) Prepare the journal entry for Swifty to record income taxes payable, deferred income taxes, and income tax expense for 2019, assuming that there was a balance of $22,600 in a Deferred Tax Liability account at the end of 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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8. Cheyenne Inc. incurred a net operating loss of $460,000 in 2020. The tax rate for all years is 20%. Assume that it is more likely than not that the entire net operating loss carryforward will not be realized in future years. Prepare all the journal entries necessary at the end of 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Solution Deferred Tax Asset = $460,000 x 0.20 = $92,000 9. The pretax financial income (or loss) figures for Metlock Company are as follows. 2017 77,000 2018 (49,000 ) 2019 (44,000 ) 2020 125,000 2021 95,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2017 and a 20% tax rate for the remaining years. Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no
valuation account is deemed necessary.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Solution 2017 Income Taxes Payable = $77,000 x 25% = $19,250
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2018 Deferred Tax Asset = $49,000 x 20% = $9,800 2019 Income Tax Expense = $44,000 x 0.20 = $8,800 2020 Deferred Tax Asset = $93,000 x 0.20 = $18,600 Income Tax Payable = ($125,000 - $93,000) x 0.20 = $6,400 2021 Income Tax Payable = $95,000 x 0.20 = $19,000 Note: Income Tax Expense (Loss Carryforward) amounts are negative components of income tax expense. 10. At December 31, 2019, Blossom Company had a net deferred tax liability of $336,500. An explanation of the items that compose this balance is as follows. Temporary Differences Resulting Balances in Deferred Taxes 1. Excess of tax depreciation over book depreciation $186,400 2. Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2020. The loss will be deducted on the tax return when paid. (53,600 )
3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. 203,700 $336,500 In analyzing the temporary differences, you find that $27,100 of the depreciation temporary difference will reverse in 2020, and $126,700 of the temporary difference due to the installment sale will reverse in 2020. The tax rate for all years is 20%. Indicate the manner in which deferred taxes should be presented on Blossom Company’s December 31, 2019, balance sheet. solution
HW CHAPTER 20 1. AMR Corporation (parent company of American Airlines ) reported the following (in millions). Service cost $366 Interest on P.B.O. 737 Return on plan assets 593 Amortization of prior service cost 13 Amortization of net loss 154 Compute AMR Corporation’s pension expense. (Enter answer in millions.) Pension expense 677 millions 2. For Monty Corporation, year-end plan assets were $2,038,000. At the beginning of the year, plan assets were $1,763,000. During the year, contributions to the pension fund were $124,000, and benefits paid were $208,000. Compute Monty ’s actual return on plan assets. Actual return on plan assets 359000
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3. Bramble Importers provides the following pension plan information. Fair value of pension plan assets, January 1, 2020 $2,192,000 Fair value of pension plan assets, December 31, 2020 2,549,000 Contributions to the plan in 2020 292,000 Benefits paid retirees in 2020 356,000 From the data above, compute the actual return on the plan assets for 2020. Actual return on plan assets for 2020 421000
4. At January 1, 2020, Stellar Company had plan assets of $285,300 and a projected benefit obligation of the same amount. During 2020, service cost was $28,300, the settlement rate was 10%, actual and expected return on plan assets were $25,700, contributions were $20,400, and benefits paid were $17,000. Prepare a pension worksheet for Stellar Company for 2020.
5. Campbell Soup Company reported pension expense of $73 million and contributed $71 million to the pension fund. Prepare Campbell Soup Company’s journal entry to record pension expense and funding, assuming Campbell has no OCI amounts. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Enter amounts in millions. Ex: 10,000,000 is to be imputed as 10, eliminating the 000,000.) 6. The following information is available for the pension plan of Riverbed Company for the year 2020.
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Actual and expected return on plan assets $ 16,400 Benefits paid to retirees 41,300 Contributions (funding) 87,700 Interest/discount rate 10 % Prior service cost amortization 7,900 Projected benefit obligation, January 1, 2020 531,000 Service cost 58,300 a) Compute pension expense for the year 2020. Pension expense for 2020 102900 b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
7. Your answer is correct. The following facts apply to the pension plan of Coronado Inc. for the year 2020. Plan assets, January 1, 2020 $497,800 Projected benefit obligation, January 1, 2020 497,800 Settlement rate 8 % Service cost 37,400 Contributions (funding) 23,000 Actual and expected return on plan assets 50,400 Benefits paid to retirees 35,700 Using the preceding data, compute pension expense for the year 2020. As part of your solution, prepare a pension worksheet that shows the journal entry for pension expense for 2020 and the year-end balances in the related pension accounts. (Enter all amounts as positive.)
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8. Pharoah Company provides the following information about its defined benefit pension plan for the year 2020. Service cost $91,300 Contribution to the plan 102,900 Prior service cost amortization 9,500 Actual and expected return on plan assets 64,800 Benefits paid 39,400 Plan assets at January 1, 2020 648,700 Projected benefit obligation at January 1, 2020 694,400 Accumulated OCI (PSC) at January 1, 2020 150,900 Interest/discount (settlement) rate 9 % a) Prepare a pension worksheet inserting January 1, 2020, balances, showing December 31, 2020. (Enter all amounts as positive.)
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Solution Interest cost = $694,400 x 9% = $62,496 Note: We show actual return on the worksheet to ensure that plan assets are properly reported. If expected and actual return differ, then an additional adjustment is made to compute the proper amount of pension expense. b) Prepare the journal entry recording pension expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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10. Bonita Corp. has the following beginning-of-the-year present values for its projected benefit obligation and market-related values for its pension plan assets. Projected Benefit Obligation Plan Assets Value 2019 $2,340,000 $2,223,000 2020 2,808,000 2,925,000 2021 3,451,500 3,042,000 2022 4,212,000 3,510,000 The average remaining service life per employee in 2019 and 2020 is 10 years and in 2021 and 2022 is 12 years. The net gain or loss that occurred during each year is as follows: 2019, $327,600 loss; 2020, $105,300 loss; 2021, $12,870 loss; and 2022, $29,250 gain. (In working the solution, the gains and losses must be aggregated to arrive at year-end balances.) Using the corridor approach, compute the amount of net gain or loss amortized and charged to pension expense in each of the four years, setting up an appropriate schedule.
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HW CHAPTER 21 1. Crane Co. processes jam and sells it to the public. Crane leases equipment used in its production processes from Larkspur, Inc. This year, Crane leases a new piece of equipment from Larkspur. The lease term is 5 years and requires equal rental payments of $16,000 at the beginning of each year. In addition, there is a renewal option to allow Crane to keep the equipment one extra year for a payment at the end of the fifth year of $12,000 (which Crane is reasonably certain it will exercise). The equipment has a fair value at the commencement of the lease of $77,161 and an estimated useful life of 7 years. Larkspur set the annual rental to earn a rate of return of 8%, and this fact is known to Crane. The lease does not transfer title, does not contain a bargain purchase option, and the equipment is not of a specialized nature. Click here to view factor tables. How should Crane classify this lease? Crane should classify the lease as a/an select a type of lease finance lease.
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2. Shamrock Company leases a building and land. The lease term is 7 years and the annual fixed payments are $720,000. The lease arrangement gives Shamrock the right to purchase the building and land for $12,750,000 at the end of the lease. Based on an economic analysis of the lease at the commencement date, Shamrock is reasonably certain that the fair value of the leased assets at the end of lease term will be much higher than $12,750,000. What are the total lease payments in this lease arrangement? Total lease payments $17790000 Solution The lease payments in the lease arrangement will include both the annual fixed payments of $720,000 each year, plus the $12,750,000 bargain purchase option at the end of the lease term (as it is reasonably certain to be exercised). Thus, the lease payments for the lease agreement total ($720,000 × 7) + $12,750,000 = $17,790,000 . 3. Assume that IBM leased equipment that was carried at a cost of $66,000 to Blossom Company. The term of the lease is 6 years beginning December 31, 2019, with equal rental payments of $20,038 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $95,998. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 10%, no bargain
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purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $95,998. Prepare IBM’s December 31, 2020, entry to record the lease transaction with Blossom Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275 . ) Solution Lease Revenue = [($95,998 – $20,038) × 0.010] = $ 7,596 4. Kingbird Corporation manufactures drones. On December 31, 2019, it leased to Althaus Company a drone that had cost $102,700 to manufacture. The lease agreement covers the 5- year useful life of the drone and requires 5 equal annual rentals of $41,400 payable each December 31, beginning December 31, 2019. An interest rate of 9% is implicit in the lease agreement. Collectibility of the rentals is probable. Prepare Kingbird ’s December 31, 2019, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275 . )
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Solution Lease Receivable = ($41,400 × 4.23972*) = $175,524 *Present value of an annuity due 1 for 5 periods at 9%. 5. LeBron James (LBJ) Corporation agrees on January 1, 2020, to lease equipment from Blossom, Inc. for 3 years. The lease calls for annual lease payments of $22,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ’s journal entries on January 1, 2020 (commencement of the operating lease), and on December 31, 2020. Assume the implicit rate used by the lessor is unknown, and LBJ’s incremental borrowing rate is 6%. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Solution 1/1/20: Right-of-Use Asset (2.83339* × $22,000) = $62,335 *Present value of an annuity due of 1 for 3 periods at 6%. Schedule A LEBRON JAMES CORPORATION
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Lease Amortization Schedule Annuity-Due Basis Date Annual Payment Interest (6%) on Liability Reduction of Lease Liability Lease Liability 1/1/20 $62,335 1/1/20 $22,000 $0 $22,000 40,335 1/1/21 22,000 2,420 ** 19,580 20,755 1/1/22 22,000 1,245 20,755 0 Schedule B Lease Expense Schedule Date (A) Lease Expense (Straight- Line) (B) Interest (6%) on Lease Liability (c) Amortization of ROU Asset (A - B) Carrying Value of ROU Asset 1/1/20 $62,335 12/31/20 $22,000 $2,420 $19,580 42,755 12/31/21 22,000 1,245 20,755 22,000 12/31/22 22,000 0 22,000 0 **The accrual of the lease liability is a result of the accrual of interest related to the
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lease liability, as shown in schedule A. Note that this is expensed along with the amortization of the right-of-use asset at the end of 2020 6. Bramble Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8 -year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Prepare Bramble ’s journal entries on January 1, 2020, and December 31, 2020. Assume the annual lease payment is $50,000 at the beginning of each year, and Bramble ’s incr emental borrowing rate is 6 %, which is the same as the lessor’s implicit rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Solution 1/1/20: Right-of-Use Asset (2.83339* × $50,000) = $141,670 *Present value of an annuity due of 1 for 3 periods at 6%. Schedule A BRAMBLE CORPORATION
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Lease Amortization Schedule Annuity-Due Basis Date Annual Payment Interest (6%) on Liability Reduction of Lease Liability Lease Liability 1/1/20 $141,670 1/1/20 $50,000 $0 $50,000 91,670 1/1/21 50,000 5,500 ** 44,500 47,170 1/1/22 50,000 2,830 47,170 0 Schedule B Lease Expense Schedule Date (A) Lease Expense (Straight- Line) (B) Interest (6%) on Lease Liability (c) Amortization of ROU Asset (A - B) Carrying Value of ROU Asset 1/1/20 $141,670 12/31/20 $50,000 $5,500 $44,500 97,170 12/31/21 50,000 2,830 47,170 50,000 12/31/22 50,000 0 50,000 0 **The accrual of the lease liability is a result of the accrual of interest related to the
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lease liability, as shown in schedule A. Note that this is expensed along with the amortization of the right-of-use asset at the end of 2020. 7. Novak Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8 -year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $30,000 at the beginning of each year, and Novak ’s incremental borrowing rate is 9 %, which is the same as the lessor’s implicit rate. Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $168,000. Falls uses straight-line depreciation and the leased asset has zero residual value at the end of its useful life. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Solution Accumulated Depreciation – Leased Equipment = $168,000 ÷ 8 = $21,000 8. Splish Brothers Company leases equipment for 8 years with an annual rental of $3,200 per year or $25,600 in total. General Leasing (the lessor) agrees to provide Splish Brothers with $300 for the first 2 years of the lease to defray needed repairs to the equipment. Determine the total lease payments that Splish Brothers will pay for the first 3 years of the lease agreement.
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Lease payments $9000 SOlution The lease payments for years 1 and 2 will be $2,900 ($3,200 annual rental minus $300 lease incentive). In year 3, Splish Brothers will receive no lease incentive, and will have a full lease payment of $3,200. Thus, in total over the first 3 years, the lease payments will be $9,000 ($2,900 + $2,900 + $3,200). 9. Marin Company is negotiating to lease a piece of equipment to MTBA, Inc. MTBA requests that the lease be for 9 years. The equipment has a useful life of 10 years. Marin wants a guarantee that the residual value of the equipment at the end of the lease is at least $6,000. MTBA agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,500 at the end of the lease term. If the fair value of the equipment at lease commencement is $105,000, what would be the amount of the annual rental payments Marin demands of MTBA, assuming each payment will be made at the beginning of each year and Marin wishes to earn a rate of return on the lease of 10%? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.) Amount of equal annual lease payments $16173 Solution Fair Value of Leased Asset $105,000 Less: Present value of guaranteed residual value ($6,000 × 0.42410*) 2,545 Amount to be recovered through lease payments $102,455 Amount of equal annual lease payments ($102,455 ÷ 6.33493**) $16,173 *Present value of 1 for 9 periods at 10%. **Present value of an annuity due of 1 for 9 periods at 10%.
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HW CHAPTER 22 1. Riverbed, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2020. The increase in the prior year's income before taxes is $1,216,500. The tax rate is 20%. Prepare Riverbed ’s 2020 journal entry to record the change in accounting principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Solution Deferred Tax Liability = ($1,216,500 x 20%) = $243,300 2. Sandhill Company changed depreciation methods in 2020 from double-declining-balance to straight-line. Depreciation prior to 2020 under double-declining-balance was $95,400, whereas straight-line depreciation prior to 2020 would have been $48,300. Sandhill ’s depreciable assets had a cost of $260,200 with a $38,800 salvage value, and an 9-year remaining useful life at the beginning of 2020. Prepare the 2020 journal entry related to Sandhill ’s depreciable assets (equipment). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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3. Skysong Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. ( Hint : Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2020 $720,000 $551,000 $169,000 2021 636,000 498,000 138,000 (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021? Net income $381600 b) (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when amount is entered. Do
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not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Solution The net income to be reported in 2021, using the retrospective approach, would be computed as follows: (a) Income before income tax $636,000 Income tax (40% x $636,000) 254,400 Net income $381,600 (b) Deferred Tax Liability = ($169,000 x 40%) = $67,600 Retained Earnings = ($169,000 x 60%) = $101,400 4. Flint Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018 – 2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method
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2018 $16,150 $19,070 $11,880 2019 18,050 20,830 13,890 2020 20,200 25,150 16,840 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. Net Income 2018 $19070 2019 $ 20830 2020 $ 25150 (c) Assume Flint Company used the LIFO method instead of the average cost method during the years 2018 – 2020. In 2021, Flint changed to the FIFO method. Prepare the journal entry necessary to record the change in principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Solution
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(a) Inventory = ($19,070 + $20,830 + $25,150) – ($16,150 + $18,050 + $20,200) = $10,650 (c) Inventory = ($19,070 + $20,830 + $25,150) – ($11,880 + $13,890 + $16,840) = $22,440 Sage Company purchased a computer system for $72,200 on January 1, 2019. It was depreciated based on a 7-year life and an $19,000 salvage value. On January 1, 2021, Sage revised these estimates to a total useful life of 4 years and a salvage value of $10,100. Sage uses straight-line depreciation. Prepare Sage ’s entry to record 2021 depreciation expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items. Identify whether each of the items below is a change in principle, a change in estimate, or an
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error. Roundtree Manufacturing Co. is preparing its year-end financial statements and is considering the accounting for the following items. Identify whether each of the items below is a change in principle, a change in estimate, or an error. At January 1, 2020, Ivanhoe Company reported retained earnings of $2,100,000. In 2020, Ivanhoe discovered that 2019 depreciation expense was understated by $420,000. In 2020, net income was $796,000 and dividends declared were $281,000. The tax rate is 20%.
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Prepare a 2020 retained earnings statement for Ivanhoe Company. Bonita Tool Company’s December 31 year -end financial statements contained the following errors. December 31, 2020 December 31, 2021 Ending inventory $10,100 understated $7,500 overstated Depreciation expense $2,400 understated — An insurance premium of $60,300 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $14,000 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)
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A partial trial balance of Stellar Corporation is as follows on December 31, 2021. Dr. Cr. Supplies $2,700 Salaries and wages payable $1,600 Interest Receivable 5,000 Prepaid Insurance 85,600 Unearned Rent 0 Interest Payable 15,600 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2021, totaled $1,200.
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2. Through oversight, the Salaries and Wages Payable account was not changed during 2021. Accrued salaries and wages on December 31, 2021, amounted to $4,800. 3. The Interest Receivable account was also left unchanged during 2021. Accrued interest on investments amounts to $4,100 on December 31, 2021. 4. The unexpired portions of the insurance policies totaled $63,800 as of December 31, 2021. 5. $29,400 was received on January 1, 2021, for the rent of a building for both 2021 and 2022. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $4,800 rather than the correct figure of $48,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,500 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment. (a) • Your Answer • Correct Answer Correct answer icon Your answer is correct. Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2021? (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
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Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2021? (Ignore income tax considerations.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Pass the necessary adjusting entries for the following taking into account income tax effects (40% tax rate) and assuming that the books have been closed. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. Depreciation on equipment for the year was erroneously recorded as $4,800 rather than the correct figure of $48,000.
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2. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,500 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.
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Related Questions
Pretax financial statement income for the year ended December 31, 2024 was $180 million for Wilton Company. Wilton's taxable income was $120 million. This was a result of differences between depreciation for financial reporting purposes and tax purposes. The enacted tax rate is 20% for 2024 and 25% thereafter. What amount should Wilton report as the current portion of income tax expense for 2024? $45 million $24 million $30 million $36 million
I need help part B
independent problems:   1. ABC Company reported in its 2019 current tax expense at P 5,530,000. The following changes in ABC asset's and liabilities are as follows: Deferred tax asset 12/31/2019-200,000 12/31/2018-500,000 Deferred tax liability 12/31/2019-420,000 12/31/2018-600,000 Income tax payable 12/31/2019-850,000 12/31/2018-200,000 The deferred tax liability was caused by accelerated depreciation and the deferred tax asset is for rentals received in advance.   How much is ABC's total income tax expense?   2. ABC Inc. began operations on July 1,2019. The company recognizes income from long term construction contracts under the percentage of completion method in its financial statements and under the cost recovery method for income tax purposes. Income under each are as follows: 2019 Cost recovery- P 0 % of completion- P 700,000 2020 Cost recovery- P 800,000 % of completion- P 1,280,000 2021 Cost recovery- P 1,350,000 % of completion- P 1,700,000 The income tax rate was 32% for…
x Company reports the following pretax income (loss) for both book and tax purposes.   Year.     Pretax income      tax rate 2018        120,000              20% 2019          93,000             20% 2020.       (82,000)            25% 2021          110,000            25% The tax rates listed were enacted by the beginning of 2018 Prepare the journal entries for years 2018-2021 to record income tax expense (benefit) and income taxes payable and the tax effects of the loss carryforward assuming that based on the weight of available evidence it is more likely than not that one half of the benefits of the loss carryforward will not be realized.
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