At the end of 2016, its first year of operations, Slater Company reported a book value for its depreciable assets of $40,000 for financial reporting purposes and $33,000 for income tax purposes. Slater earned taxable income of $97,000 during 2016. The company is subjectto a 30% income tax rate, and no change has been enacted for future years. The depreciation was the only temporary difference between taxable income and pretax financial income.Required:1. Prepare Slater's income tax journal entry at the end of 2016.2. Show how the deferred taxes would be reported on Slater's December 31, 2016, balance sheet.

Answered: Image /qna-images/answer/1cdef845-4c8e-4ace-a8e8-d30819dadee1.jpg

Answered: At the end of 2016, its first year of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Acme Company uses an accelerated depreciation method for income tax purposes and the straight-line depreciation method for financial reporting purposes. As of December 31, 2018, Acme has a $100,000 taxable temporary difference (tax-effected amount) on its balance sheet related to the book and tax basis difference in fixed assets (from depreciation). In 2019, depreciation for income tax purposes was $200,000, while depreciation for financial reporting purposes was $260,000. If the income tax rate is 25% and no other temporary or permanent differences exist, what would the ending deferred tax balance as of 12/31/19 be?
Ayres Services acquired an asset for $116 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: (S in millions) 2019 $ 420 $ 440 $ 455 29.0 2018 2020 2021 $ 490 Pretax accounting income Depreciation on the income statement Depreciation on the tax return 29.0 29.0 29.0 (34.0) (42.0) (24.0) 415 $ 427 (16.0) $ 503 Taxable income $ 460 Required: Determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Beginning of 2018 End of…
At the beginning of 2019, Norris Company l1ad 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 2018 and 2019, but in 2018 Congress enacted a 40% tax rate for 2020 and future years. Norris’s accounting records show the following pretax items of finacial income for 2019: income from continuing operations, $120,000 (revenues of $352,000 and expenses of $232,000); gain On disposal of Division F, $23,000; loss from operations of discontinued Division F, $10,000；and prior period adjustment, $15,000, due to an error that understated revenue in 2018. All of these items are taxable; however, financial depreciation for 2019 on assets related to continuing operations exceeds tax depreciatio11 by $5,000. Norris had a retained earnings balance of $161,000 on January 1, 2019, and declared and paid casl1 dividends of $32,000 during 2019. 1. Prepare Norris’s…
Prior to 2019, the accounting income and taxable income for Sheffield Corporation were the same. On January 1, 2019, the company purchased equipment at a cost of $1,116,000. For accounting purposes, the equipment was to be depreciated over six years using the straight-line method and no residual value. For income tax purposes, the equipment was subject to a CCA rate of 30% (half-year rule applies for 2019). Sheffield's income before tax for accounting purposes for 2020 was $13,000,000. The company was subject to a 20% income tax rate for all applicable years and anticipated profitable years for the foreseeable future. Sheffield follows IFRS. Calculate taxable income and taxes payable for 2020. Taxable income Income taxes payable $ eTextbook and Media List of Accounts %24 %24
Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 800,000 Estimated litigation expense 2,000,000 Installment sales (1,600,00) Taxable income $ 1,200,000 The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 40% for all years. 3. The deferred tax liability - current to be recognized is a. $240,000 b. $480,000 c. $320,000 4. $640,000
In 2025, Sheridan Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $3650000. The facilities were sold in March 2026 and a $3650000 loss was recognized for tax purposes. Also in 2025, Sheridan paid $156000 in premiums for a two-year life insurance policy in which the company was the beneficiary. Assuming that the enacted tax rate is 20% in both 2025 and 2026 and that Sheridan paid $1220000 in income taxes in 2025, the amount reported as net deferred income taxes on Sheridan's balance sheet at December 31, 2025, should be a O $698800 asset. O $365000 asset. O $365000 liability. O $730000 asset.
Hafnaoui Company reported pretax net income from continuing operations of $1,104,000 and taxable income of $661,500. The book-tax difference of $442,500 was due to a $295,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $118,000 due to an increase in the reserve for bad debts, and a $265,500 favorable permanent difference from the receipt of life insurance proceeds. At the end of the year, the reserve for bad debts had a balance of $147,500; the beginning balance in the account was $29,500. Hafnaoui's beginning book (tax) basis in its fixed assets was $1,038,000 ($857,000) and its ending book (tax) basis is $1,595,000 ($1,119,000). d. Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent. Note: Amounts to be deducted should be indicated by a minus sign. Round your percentages to 2 decimal places. ETR reconciliation (in $) Income tax expense at 21% Tax benefit from permanent…
Lion, Inc. reported taxable income of $530,000 for its most recent current year end. Not included in the company's computation of taxable income were: tax-exempt interest of $17,000 and disallowed expenses of $21,000. Lion deducted depreciation of $137,000 on its tax return. Under the alternative (E&P) depreciation method, the deduction would have been $87,000. Lion paid out dividends to its 4 equal shareholders of $20,000 each on December 1, 2021. Lion has been incorporated for a number of years and has accumulated earnings and profits of $1,870,000 as computed at the beginning of the current year. a. Compute the company's current E&P for the year ended December 31, 2021. b. Compute the company's accumulated E&P for January 1, 2022.
Godo
Ayres Services acquired an asset for $96 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2021. The enacted tax rate is 25% Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 2021 $380 24 (96) Cumulative Temporary Difference Deferred Tax Liability $308 ($ in millions) 2023 2024 2022 $400 24 (0) (0) $415 $450 24 24 (0) $424 $439 $474 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should…
WCC Corporation has a $115,000 net operating loss carryover to 2023 from a previous year. Assume that it reported $78,000 of taxable income in 2023 (before the net operating loss deduction) and $45,000 of taxable income in 2024 (before the net operating loss deduction). Note: Leave no answer blank. Enter zero if applicable. b. What is WCC's taxable income in 2023 and 2024 (after the net operating loss deduction), assuming the $115,000 NOL carryover originated in 2020 and WCC elected to forgo the NOL carry back option? Year 2023 2024 Taxable Income
Candyland Property and Casualty Insurance Corporation reported a net operating loss of $220,000 for financial reporting and tax purposes in 2019. The enacted tax rate is 25%. Taxable income and tax rates in Candyland's first two years of operation were as follows: 2017 $40,000 30% 2018 $100,000 25% Assuming NOL carryback is allowed for companies up to 2 years, the amount of net loss reported on the income statement for the year ended December 31, 2019 would be: O $154,000 O $158,000 O $163,000 O $165,000

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS