Exercise 16-5 (Algo) Taxable income given; calculate deferred tax liability from book-tax difference;100% depreciation in the year of purchase; financial statement effects [LO16-2]Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years ona straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rateis 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:2024($ in millions)202520262027Pretax accounting income$ 370$ 390Depreciation on the income statement2020$ 40520Depreciation on the tax return(80)(0)(0)$ 44020(8)$ 310$ 410$ 425$ 460Taxable incomeRequired:For December 31 of each year, determine (a) the cumulative temporary book-tex difference for the depreciable asset and (b) thebalance to be reported in the deferred tax liability account.Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).Cumulative Temporary DifferenceDeferred Tax LiabilityBeginning of 2024 End of 2024End of 2025End of 2026End of 2027

Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate: is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 Pretax accounting income $ 370 $ 390 $ 405 2027 $ 440 Depreciation on the income statement Depreciation on the tax return 20 20 20 20 (80) (e) (e) (@)

Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate: is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 Pretax accounting income $ 370 $ 390 $ 405 2027 $ 440 Depreciation on the income statement Depreciation on the tax return 20 20 20 20 (80) (e) (e) (@)

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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Part 1 Prepare journal entries to the following. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.) a. Issuance of the bonds on June 1, 2023 b. Payment of interest on December 1, 2023 c. Adjusting entry to accrue bond interest and discount amortization on January 31, 2024 d. Payment of interest on June 1, 2024 Assume JetCom Inventors Inc. has a January 31 year-end. View transaction list Journal entry worksheet 1 2 3 4 Record issued bond at discount. Note: Enter debits before credits. Date June 01, 2023 General Journal Debit Credit >
Fore Farms reported a pretax operating loss of $176 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2022 $ 80 million 2023 $ 56 million Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $208 million. No additional temporary differences originate in 2025.
Troy Ltd., at the end of 2023, its first year of operations, prepared a reconciliation between pre- tax accounting income and taxable income as follows: Pre-tax accounting income $300,000 Excess CCA claimed for tax purposes ... (600, 000) Estimated expenses deductible when paid $200,000 Use of the depreciable assets will result in taxable 500,000 Taxable income ... amounts of $200,000 in each of the next three years. The estimated expenses of $500,000 will be deductible in 2026 when settlement is expected to be made. The enacted tax rate is 25% and is to increase to 30%, starting in 2024. Instructions a) Prepare a schedule of the deferred taxable and deductible amounts. b) Prepare the required adjusting entries to record income taxes for 2023
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Caramel Company at the end of 2022, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income- 3,000,000 Estimated litigation expense- 4,000,000 Excess tax depreciation- (6,000,000) Taxable Income- 1,000,000 The estimated litigation expense of 4,000,000 will be deductible in 2023 when it is expected to be paid. Th edepreciable assets will result in deductible amounts of 2,000,000 in each of the next three years. The income tax rate is 20% for all years. The amount of deferred tax liability to be recognized for 2022 is
Caramel Co. at the end of 2022, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income -$3,000,000 Estimated litigation expense- 4,000,000 Excess tax depreciation- (6,000,000) Taxable Income- $1,000,000 The estimated litigation expense of $4,000,000 will be deductible in 2023 when it is expected to be paid. The depreciable assets will result in deductible amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. Income taxes payable for 2022 is
Fore Farms reported a pretax operating loss of $200 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $8 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $30 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. 2. What is the net loss reported in 2024 income statement? 3. Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $215 million. No additional temporary differences originate in 2025.
During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% is in effect for all years.For an asset that cost $11,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different methods is as follows: Year Straight Line SYD Difference 2019 $ 1,000 $ 1,818 $ 818 2020 1,000 1,636 636 $ 2,000 $ 3,454 $ 1,454 Required:1. Prepare the journal entry that Faulkner will record in 2021 related to the change.2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years’- digits in 2021. Prepare the journal entry that Faulkner will record in 2021 related to the change. Please…
.(BE 18-7) Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2020. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses straight-line depreciation over five years. The enacted tax rate is 25% for all years. This depreciation difference is the only reversing difference the company has. (a) Calculate the amount of capital cost allowance and depreciation expense from 2020 to 2024, as well as the corresponding balances for the carrying amount and undepreciated capital cost of the depreciable assets at the end of each of the years 2020 to 2024. Assume that these assets are considered "eligible equipment" for purposes of the Accelerated Investment Incentive (under the All, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate). Round to the nearest dollar. (b) Determine the amount of deferred taxes that should be reported in the SFP for…
Fore Farms reported a pretax operating loss of $210 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Required: Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. What is the net loss reported in 2024 income statement? Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $235 million. No additional temporary differences originate in 2025.
Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is Ameen's 2021 net income? (Enter your answers in millions rounded to 2 decimal place (i.e., 10,000,000 should be entered as 10.00).) Net income million