In 2023, Carla Vista Corporation, which follows IFRS, discovered that equipment purchased on January 1, 2021, for $152,200 wasexpensed in error at that time. The equipment should have been depreciated over five years, with no residual value. The tax rate is30%.Prepare a single journal entry for 2023 to correct the error and record 2023 depreciation. Assume income and capital cost allowancewas reported accurately for tax purposes in all years. (List all debit entries before credit entries. Credit account titles are automaticallyindented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for theamounts.)Account Titles and ExplanationEquipmentDeferred Tax LiabilityDepreciation ExpenseAccumulated Depreciation - EquipmentRetained EarningsDebit15220030440Credit273969132054792

Approach to Solving the Question:Identify the Error and Correction Needed:Determine the initial…

Answered: In 2023, Carla Vista Corporation, which…

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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You are provided the following transactions which occurred during the tax year which 31 December 2022 for Serowe Ltd. The company disposed some of its Heavy Plant and Machinery that it had bought on 30 November 2020 for P1,200,000. The company received P350,000. Serowe Ltd bought new Plant and Machinery to replace the disposed ones for P3,200,000. Assume that the company elects to apply rollover relief, calculate the capital allowances on the new plant and machinery for the current tax year.
Thor, Inc reported depreciation on the income statement by the straight-line method on an asset with a four-year useful life. MACRS is used for the tax return. Income statement: $5 million each year. Tax Return: 2020 $7 million; 2021 $6 million; 2022 $4 million; 2023 $3 million. The income tax rate is 20% for all years. The current year is 2022. Which of the following statements is true regarding the differences between accounting and tax depreciation? The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is originating, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.4M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.6M. The 2022…
On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2020, the book value of the equipment was $30 million and its tax basis was $20 million. At December 31, 2021, the book value of the equipment was $28 million and its tax basis was $12 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $50 million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen's 2021 net income?
On December 31, 2021, Winston Inc. has determined that it is more likely than not that $258000 of a $611000 deferred tax asset will not be realized. The journal entry to record this reduction in asset value will include a O debit to Income Tax Payable of $258000. O credit to the Allowance to Reduce Deferred Tax Asset to Expected Realizable Value of $258000. O credit to Income Tax Expense for $353000. Odebit to Income Tax Expense for $353000
Fore Farms reported a pretax operating loss of $204 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 $ 92 million 2023 $ 68 million Required: Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. Assume Fore will carry back its NOL to prior years. What is the net operating loss reported in 2024 income statement? Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $232 million. No…
Oriole Corporation purchased a machine on January 2, 2020, for $4300000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes: 2020 $860000 2023 $494500 2021 1376000 2024 494500 2022 825600 2025 249400 Assuming an income tax rate of 20% for all years, the net deferred tax liability that should be reflected on Oriole's balance sheet at December 31, 2021 be $103200 $73100 $0 $6880
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.
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Penny Company purchased equipment on 1/1/21 for $50,000. The company mistakenly expensed the entire cost although the equipment had a 5-year useful life. The error was discovered in 2023 before the books are closed and depreciation expense was appropriately recorded for the current 2023 year. In 2023 and 2022 comparative financial statements, a Prior Period Adjustment would be recognized as follows(ignore income tax effects): O 2023: $20,000; 2022: $30,000. O 2023: -0-; 2022: $30,000. O 2023: $10,000; 2022: $10,000. O 2023: -0-; 2022: $40,000.
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…
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

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