Assume a company starts operations on 1/1/2013 with an equity investment of $776,750. The companies next 7 years of financial performance are listed below. Assume that the company has no permanent or temporary differences for the first three fiscal years. During fiscal 2016 the company experiences a net operating loss. The marginal corporate tax rates for each year are located on the Income Statement. Calculate taxable income (IRS), taxes payable (IRS)and tax expenses (USGAAP). How should the company accounts for the Net Operating Loss. Provide all Journal Entries & T-Accounts. Create a complete set of financial statements (I/S, SRE, B/S, SCF) for the firm for years 2013 through 2019. INCOME STATEMENT 1/1/13 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 Cash Sales - $776,750 $776,750 $776,750 $119,500 $836,500 $717,000 $746,875 Credit Sales - - - - - - - - Instalment Sales - - - - - - - -- Total Revenues - $776,750 $776,750 $776,750 $119,500 $836,500 $717,000 $746,875 Operating Expenses - $657,250 $657,250 $657,250 $657,250 $657,250 $657,250 $657,250 EBT (Pre-tax Financial inc) - $119,500 $119,500 $119,500 ($537,750) $179,250 $59,750 $89,625 Tax Rates - 30% 40% 21% 21% 21% 21% 21%

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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Assume a company starts operations on 1/1/2013 with an equity investment of $776,750. The companies next 7 years of financial performance are listed below. Assume that the company has no permanent or temporary differences for the first three fiscal years. During fiscal 2016 the company experiences a net operating loss. The marginal corporate tax rates for each year are located on the Income Statement.

Calculate taxable income (IRS), taxes payable (IRS)and tax expenses (USGAAP).
How should the company accounts for the Net Operating Loss.
Provide all Journal Entries & T-Accounts.
Create a complete set of financial statements (I/S, SRE, B/S, SCF) for the firm for years 2013 through 2019.

INCOME STATEMENT	1/1/13	12/31/13	12/31/14	12/31/15	12/31/16	12/31/17	12/31/18	12/31/19
Cash Sales	-	$776,750	$776,750	$776,750	$119,500	$836,500	$717,000	$746,875
Credit Sales	-	-	-	-	-	-	-	-
Instalment Sales	-	-	-	-	-	-	-	--
Total Revenues	-	$776,750	$776,750	$776,750	$119,500	$836,500	$717,000	$746,875
Operating Expenses	-	$657,250	$657,250	$657,250	$657,250	$657,250	$657,250	$657,250
EBT (Pre-tax Financial inc)	-	$119,500	$119,500	$119,500	($537,750)	$179,250	$59,750	$89,625
Tax Rates	-	30%	40%	21%	21%	21%	21%	21%

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