**Transcription: Educational Content on Deferred Income Taxes**---**Scenario:**Due to differences between depreciation reported in the income statement and depreciation deducted for tax purposes, Lucas Corp. has $2 million in temporary differences that will increase taxable income next year. Assuming that Lucas has no other temporary differences, deferred income taxes should be reported in this year's ending balance sheet as a:**Multiple Choice:**- ☐ Current deferred asset.- ☐ Noncurrent deferred tax asset.- ☐ Current deferred tax liability.- ☐ Noncurrent deferred tax liability.---**Explanation:**This multiple-choice question examines the concepts of deferred tax assets and liabilities that arise due to temporary differences in financial and tax reporting. Understanding whether such items are current or noncurrent depends on when the differences are expected to reverse and affect future taxable income. The classification also affects how it is reported on the balance sheet.

Deferred tax liability forms a part of balance sheet and represent the taxes that will be due in the…

Answered: Due to differences between depreciation…

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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Book income of $1,900,000 Included in the computation were favorable temporary differences of $230,000, unfavorable temporary differences of $226,000 and favorable permanent differences of $168,000. What is the company's deferred income tax expense or benefit?
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[The following information applies to the questions displayed below] What book-tax differences in year 1 and year 2 associated with its capital gains and losses would ABD Incorporated report in the following alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent or temporary. Note: Leave no answer blank. Enter zero if applicable and select "Not applicable" if no effect. f. Answer for year 7 only. Capital gains Capital losses Year 1 $ 0 10,000 Years 2 Year 7 $ 0 0 $ 15,000 0 Book-tax Difference Favorable or Unfavorable Year 7 Temporary or Permanent
Earnings (loss) Depreciation (assets have a cost of $390,000) CCA Non-deductible expenses Tax rate Taxable income 1. What is the amount of the taxable income or loss in each year? (Negative amounts and deductible amounts should be indicated by a minus sign.) Accounting earnings Permanent difference: Accounting income subject to tax Temporary difference: Taxable income 20X7 20X7 (first year of operations) $99,000 $50,000 $65,000 $19,000 25% 20X8 20X8 $ (168,000) $ 50,000 $ 75,000 $ 19,000 25%
Concord Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2020 $747,000 $539,000 $208,000 2021 673,000 468,000 205,000 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021?
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book-tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and the tax rate is 25%. Required:1. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized.2. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $100 million attributable to a temporary book- tax difference of $400 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $304 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $720 million and the tax rate is 25%. Required: 1. Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized in full. 2. Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry(s) to record Payne's income taxes for 2021, assuming it is more likely than not that the deferred…
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Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: Taxable income Future deductible amounts Future taxable amounts Balance(s) at beginning of the year: Deferred tax asset Deferred tax liability. The enacted tax rate is 25%. a. Income tax payable currently. b. Deferred tax asset-ending balance. c. Deferred tax asset-change. d. Deferred tax liability-ending balance. e. Deferred tax liability-change. f. Income tax expense. 1 ¹ 1 2 ³ $132 $264 $292 16 | ($ in thousands) Situation 2 16 2 8 Required: For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.) Situation 20 16 3 21 2 4| $404 20 76 4 4
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