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 difference Income tax provision ETR reconciliation (in %) Hypothetical income tax rate Tax benefit from permanent difference Effective tax rate 21.00% % 15.95 %

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 difference Income tax provision ETR reconciliation (in %) Hypothetical income tax rate Tax benefit from permanent difference Effective tax rate 21.00% % 15.95 %

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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Hafnaoui Company reported pretax net income from continuing operations of $912,000 and taxable income of $587,500. The book–tax difference of $352,500 was due to a $235,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $94,000 due to an increase in the reserve for bad debts, and a $211,500 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 $117,500; the beginning balance in the account was $23,500. Hafnaoui's beginning book (tax) basis in its fixed assets was $1,014,000 ($821,000) and its ending book (tax) basis is $1,535,000 ($1,107,000). a. Compute Hafnaoui Company's current income tax expense. b. Compute Hafnaoui Company's deferred income tax expense or benefit. c. Compute Hafnaoui Company's effective tax rate. d. Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent.
Grand Corporation reported pretax book income of $612,000. Tax depreciation exceeded book depreciation by $408,000. In addition, the company received $306,000 of tax-exempt municipal bond interest. The company's prior-year tax return showed taxable income of $51,000. Compute the company's current income tax expense or benefit. (Leave no answer blank. Enter N/A or zero.) 이 Current income tax Deferred income tax N/A expense $
During the current year, Dale Corporation sold a segment of its business at a gain of $315,000.Until it was sold, the segment had a current period operating loss of $112,500. The company had$1,275,000 from continuing operations for the current year.Prepare the lower part of the income statement, beginning with the $1,275,000 income fromcontinuing operations. Follow tax allocation procedures, assuming that all changes in incomeare subject to a 20% income tax rate. Disregard earnings per share disclosures. (Round all calculations to nearest dollar amount.)
Required information [The following information applies to the questions displayed below.] Hafnaoui Company reported pretax net income from continuing operations of $1,136,000 and taxable income of $678,500. The book-tax difference of $457,500 was due to a $305,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $122,000 due to an increase in the reserve for bad debts, and a $274,500 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 $152,500, the beginning balance in the account was $30,500. Hafnaoul's beginning book (tax) basis in its fixed assets was $1,042,000 ($863,000) and its ending book (tax) basis is $1,605,000 ($1,121,000). b. Compute Hafnaoul Company's deferred income tax expense or benefit. N Enter all numbers as a positive number and indicate whether a deferred tax expense or a deferred tax benefit. Deferred income tax expense
77. Hafnaoui Company reported pretax net income from continuing operations of $800,000 and taxable income of $500,000. The book-tax difference of $300,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $80,000 due to an increase in the reserve for bad debts, and a $180,000 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 $100,000; the beginning balance in the account was $20,000. Hafnaoui's beginning book (tax) basis in its fixed assets was $1,000,000 ($800,000) and its ending book (tax) basis is $1,500,000 ($1,100,000). a) Compute Hafnaoui Company's current income tax expense. b) Compute Hafnaoui Company's deferred income tax expense or (benefit). c) Compute Hafnaoui Company's effective tax rate. d) Provide a reconciliation of Hafnaoui Company's effective tax rate with its hypothetical tax rate of 21 percent.
Cadillac Square Corporation determined that $1,128,800 of its research tax credit on its current-year tax return was uncertain, but that it was more likely than not to be sustained on audit. Management made the following assessment of the company's potential tax benefit from the deduction and its probability of occurring. Individual Cumulative Potential Estimated Benefit (000s) $1,128,800 $ 964,500 $ 233,250 0 Probability of Probability of Occurring (%) Occurring (%) 47 30 15 8 Tax benefit amount recognized 47 77 92 100 What amount of the tax benefit related to the uncertain tax position from the research tax credit can Cadillac Square Corporation recognize in calculating its income tax provision in the current year?
Chandler Corporation reported pre-tax book income of $1,900,000. Tax depreciation exceeded book depreciation by $600,000. During the year the Company capitalized $250,000 into ending inventory under §263A. Capitalized inventory costs of $150,000 in beginning inventory were deducted as part of cost of goods sold on the tax return. Assuming a tax rate of 21%, compute the company’s taxes payable or refundable.
Li Corporation reported pretax book income of $605,000. Tax depreciation exceeded book depreciation by $401,000. Li's beginning book (tax) basis in its fixed assets was $1,905,000 ($1,704,000) and its ending book (tax) basis is $1,805,000 ($1,206,000). In addition, the company received $305,000 of tax-exempt municipal bond interest. The company's prior-year tax return showed taxable income of $69,000. Assuming a tax rate of 21 percent, compute the company's deferred income tax expense or benefit. Note: Enter all numbers as a positive number and indicate whether a deferred tax expense or a deferred tax benefit. Deferred income tax expense
Lanco Corporation, an accrual-method corporation, reported taxable income of $1,720,000 this year and paid Federal income tax of $361,200. Included in the computation of taxable income were the following items: • MACRS depreciation of $253,000. Depreciation for earnings and profits purposes is $124,000. • A net capital loss carryover of $13,700 from last year. • A net operating loss carryover of $31,000 from last year. $76,750 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: • Tax-exempt income of $8,600. • Life insurance proceeds of $267,000. • Excess current-year charitable contribution of $2,300 (to be carried over to next year). • Tax-deferred gain of $21,300 on a like-kind exchange. • Nondeductible life insurance premium of $4,700. • Nondeductible interest expense of $3,600 on a loan used to buy tax-exempt bonds. . Lanco's accumulated E&P at the beginning of the…
At the beginning of 20x5, Rundle Ltd. reported a deferred tax liabilty of $300,000. The net book value of the capital assets was $2,600,000, while UCC was $1,600,000. In 20x5, depreciation was $400,000, while CCA was $625,000. The tax rate changed in 20x5 to be 35 %. What is the adjustment required to the deferred taxes?
Munabhai
Sol Limited. reported earnings of $510,000 in 20X8. The company has $91,000 of depreciation expense this year, and claimed CCA of $142,000. The tax rate was 25%. At the end of 20X7, there was a $122.000 loss carryforward that was not recorded because use was considered less than probable. The company also reported a deferred tax liability of $71,000 caused by capital assets with a net book value of $1,310,000 and UCC of $1,010,000. The tax rate had been 20% in 20X7 Required: What is the amount of income tax expense in 20X8? Tax expense Prepare the income tax entry or entries. View transaction list No 1 Date 20X8 View journal entry worksheet Income tax expense Income tax payable Deferred income tax asset General Journal Debit Credit 114,750