2011 During 2011, its first yearof operations, Eli-Wallace Distributors reported pretax accounting income of $200 million which included thefollowing amounts: 1. Income (net) from installment sales of warehouses ni 2011 of$9 milion to be reported for tax purposes ni 2012 ($5 million) and 2013 ($4 milion). .2 Depreciation si reported by the straight-line method on na asset with afour-year useful life. On the tax return, deductions for depreciation will be more than straightline depreciation the first two years but less than straight-line depreciation the next two years (S in millions): 2011 2012 2013 2014 Income Statement $ 50 50 50 50 $ 2 0 0 T a x R e t u r n •66 88 30 16 $200 Difference $(16) (38) 20 34 0 3. Estimated warranty expense that wil be deductible on the taxreturn when actually paid during the next two years. Estimated deductionsare as follows $( ni millions): 2011 2012 2013 57 : $4 (4) (3) $0 income Statement Tax Return Difference 2012 During 2012, pretax accounting income of $200 milion includedan estimated loss of $1 million from having accrued a loss contingency. The loss is expected to be paid ni 2014 at which time it will be tax deductible. The enacted tax rate is 4 0 %each year. For 2011 and 2012 .1 Prepare the income tax journal entry 2. show the income tax expense on the Ils (3 lines) 3. show the deferred taxes on the balance sheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2011 During 2011, its first yearof operations, Eli-Wallace Distributors reported pretax accounting income of $200 million which included thefollowing amounts: 1. Income (net) from installment sales of warehouses ni 2011 of$9 milion to be reported for tax purposes ni 2012 ($5 million) and 2013 ($4 milion). .2 Depreciation si reported by the straight-line method on na asset with afour-year useful life. On the tax return, deductions for depreciation will be more than straightline depreciation the first two years but less than straight-line depreciation the next two years (S in millions): 2011 2012 2013 2014 Income Statement $ 50 50 50 50 $ 2 0 0 T a x R e t u r n •66 88 30 16 $200 Difference $(16) (38) 20 34 0 3. Estimated warranty expense that wil be deductible on the taxreturn when actually paid during the next two years. Estimated deductionsare as follows $( ni millions): 2011 2012 2013 57 : $4 (4) (3) $0 income Statement Tax Return Difference 2012 During 2012, pretax accounting income of $200 milion includedan estimated loss of $1 million from having accrued a loss contingency. The loss is expected to be paid ni 2014 at which time it will be tax deductible. The enacted tax rate is 4 0 %each year. For 2011 and 2012 .1 Prepare the income tax journal entry 2. show the income tax expense on the Ils (3 lines) 3. show the deferred taxes on the balance sheet.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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