At the beginning of 2016, Norris Company had a deferred tax liability of $6,400, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015Congress enacted a 37% tax rate for 2017 and future years.Norris's accounting records show the following pretax items of financial income for 2016: income from continuing operations, $119,300 (revenues of $351,000 and expenses of $231,700); gain on disposal of Division F, S21,300; loss from operations of discontinuedDivision F, $8,700; and prior period adjustment, $14,800, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $5,400. Norris had aretained earnings balance of $163,000 on January 1, 2016, and declared and paid cash dividends of $30,300 during 2016.Required:1. Prepare Norris's income tax journal entry at the end of 2016.2. Prepare Norris's 2016 income statement.3. Prepare Norris's 2016 statement of retained earnings.4. Show the related income tax disclosures on Norris's December 31, 2016, balance sheet.

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Answered: At the beginning of 2016, Norris…

FINANCIAL ACCOUNTING

10th Edition

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Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Lewes Company appropriately uses the installment sales method for tax purposes and the accrual method for revenue recognition for accounting purposes. Pertinent data at December 31, 2016, the close of the first year of operations, are as follows: Revenue Recognized Revenue Recognized Customer for Accounting Purposes for Tax Purposes Lowe's Builders $200,000 $100,000 Top Down Plumbing 500,000 350,000 Glass Plus Windows 600,000 350,000 Lewes's tax rate is 30%. What amount should be included in the deferred tax account at December 31, 2016 for these installment sales?
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At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,300 (revenues of $351,500 and expenses of $231,200); gain on disposal of Division F, $24,000; loss from operations of discontinued Division F, $11,500; and prior period adjustment, $14,100, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,600. Norris had a retained earnings balance of $161,300 on January 1, 2016, and declared and paid cash dividends of $32,800 during 2016. Required: 1.…
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The whole question is as follows: At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,300 (revenues of $351,500 and expenses of $231,200); gain on disposal of Division F, $24,000; loss from operations of discontinued Division F, $11,500; and prior period adjustment, $14,100, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,600. Norris had a retained earnings balance of $161,300 on January 1, 2016, and declared and paid cash dividends of $32,800…
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