Improved Shoes Company recorded book income of $100,000 in 2020. It does not have any permanent differences, and the only temporary difference relates to a $75,000 It recorded for book purposes. Improved Shoes anticipates collecting the installment sales equally over the following 2 years. The current enacted tax rate is 40%. The substantively enacted tax rates for the following 3 years are 42%, 45%, and 45%, respectively. What deferred tax amount should Improved Shoes record for this temporairy difference under U.S. GAAP? The book basis of the installment sales receivable from the installment sales is rate Improved Shoes Company will use to calculate the deferred tax amount is in the amount of record a deferred tax than the tax basis of the asset. The tax Therefore, Improved Shoes will

Improved Shoes Company recorded book income of $100,000 in 2020. It does not have any permanent differences, and the only temporary difference relates to a $75,000 It recorded for book purposes. Improved Shoes anticipates collecting the installment sales equally over the following 2 years. The current enacted tax rate is 40%. The substantively enacted tax rates for the following 3 years are 42%, 45%, and 45%, respectively. What deferred tax amount should Improved Shoes record for this temporairy difference under U.S. GAAP? The book basis of the installment sales receivable from the installment sales is rate Improved Shoes Company will use to calculate the deferred tax amount is in the amount of record a deferred tax than the tax basis of the asset. The tax Therefore, Improved Shoes will

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

Teal Company reports pretax financial income of $72,600 for 2020. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $17,200. 2. Rent collected on the tax return is greater than rent recognized on the income statement by $20,300. 3. Fines for pollution appear as an expense of $9,900 on the income statement. Teal’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020. (a) Compute taxable income and income taxes payable for 2020. Taxable income $enter a dollar amount Income taxes payable $enter a dollar amount
Shwonson Industries reported a deferred tax asset of $9.75 million for the year ended December 31, 2020, related to a temporary difference of $39 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020–2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $49 million. Required:1. Prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021.2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson’s 2021 net income?
Sherrod, Inc., reported pretax accounting income of $70 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $4 million. The installment receivable account at year-end 2021 had a balance of $6 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $1 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $60 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but…
At the end of 2021, its first year of operations, Alsup Consulting's reconciliation of pretax accounting income to taxable income was as follows: Pretax accounting income $ 250,000 Permanent difference (14,700 ) 235,300 Temporary difference-depreciation (19,800 ) Taxable income $ 215,500 Alsup's tax rate is 25%. No estimated taxes have been paid. What should Alsup report as its deferred income tax liability as of the end of 2021?
Gallo Light began operations in 2018. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2018 was $90,000, which Gallo Light expects to collect equally over the next three years. The tax rate is 30%, but based on an enacted law, is scheduled to become 35% in 2020. Gallo Light's pretax accounting income from the 2018 income statement was $830,000, which includes $40,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.Required:(1.) Prepare the appropriate journal entry to record Gallo Light's 2018 income taxes. Show calculations.(2.) What is Gallo Light's 2018 net income?
Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020–2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $30 million.Required:Determine the effect of the tax rate change and prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021. What effect, if any, will enacting the change in the 2022 tax rate have on Shwonson’s 2021 net income?
Dunn, Inc. uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. Installment income of $3,000,000 will be collected in the following years when the enacted tax rates are: Collection of Income Enacted Tax Rates 2020 $300,000 25% 2021 600,000 20% 2022 900,000 20% 2023 1,200,000 15% The installment income is Dunn's only temporary difference. What amount should be included in the deferred income tax liability in Dunn's December 31, 2020 balance sheet? a. $480,000 b. $555,000 c. $675,000 d. $750,000
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $90 million attributable to a temporary book-tax difference of $360 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $272 million. Payne has no other temporary differences. Taxable income for 2021 is $648 million and the tax rate is 25%. Payne has a valuation allowance of $36 million for the deferred tax asset at the beginning of 2021. Required: 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. 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.
J-Matt, Inc., had pretax accounting income of $331,000 and taxable income of $376,000 in 2021. The only difference between accounting and taxable income is estimated product warranty costs of $45,000 for sales in 2021. Warranty payments are expected to be in equal amounts over the next three years (2022–2024) and will be tax deductible at that time. Recent tax legislation will change the tax rate from the current 25% to 20% in 2023. Determine the amounts necessary to record J-Matt’s income taxes for 2021 and prepare the appropriate journal entry.
Burnham Company collected rent of $3,800 during Year 1. For income tax reporting, the rent is taxed when collected. For financial reporting, the rent is recognized as income in the period earned. At the end of Year 1, the unearned portion of the rent collected during the year amounted to $440. Burnham had no temporary differences at the beginning of the current year. Assume an income tax rate of 30%. What is the amount of the deferred tax asset that should be recognized at the end of Year 1? deferred tax asset
Matador Company is preparing its 2022 financial statements. Matador's bookkeeper has determined Income from Continuing Operations (ICO) but is not certain this number is accurate. Matador has a corporate tax rate of 30%. Use the following information to determine the adjustments, if any, to ICO. (Hint: if you are adjusting ICO, should the adjustments be pre-tax or net of tax?) If you need to increase ICO, enter your answer as a positive number; for instance: 3000 If you need to decrease ICO, enter your answer as a negative number; for instance: -3000 If you determine no change is needed to ICO; enter 0. Put your answers in the provided boxes. 1) During 2022, Matador declared preferred dividends of $70,000, paid $90,000 for dividends, and received $135,000 for dividends on available-for-sale equity securities. The bookkeeper did not include any of these when calculating ICO. Determine the adjustment to ICO. Matador has a corporate tax rate of 30%. 2) Over the past 4 years, Matador has…