E19.17 (LO 1, 2, 4) (Two Differences, One Rate, BeginningDeferred Balance, Compute Pretax Financial Income) Luo Ltd.establishes a ¥9o million liability at the end of 2022 for the estimatedlitigation settlement for manufacturing defects. All related costs will bepaid and deducted on the tax return in 2023. Also, at the end of 2022, thecompany has ¥50 million of temporary differences due to excessdepreciation for tax purposes, ¥7 million of which will reverse in 2023.The enacted tax rate for all years is 40%, and the company pays taxes of¥64 million on ¥160 million of taxable income in 2022. Luo expects to havetaxable income in 2023.Instructionsa. Determine the deferred taxes to be reported at the end of 2022.b. Indicate how the deferred taxes computed in (a) are to be reported onthe statement of financial position.c. Assuming that the only deferred tax account at the beginning of 2022was a deferred tax liability of ¥10,000,000, draft the income taxexpense portion of the income statement for 2022, beginning with theline "Income before income taxes." (Hint: You must first compute (1)the amount of temporary difference underlying the beginning¥10,000,000 deferred tax liability, then (2) the amount of temporarydifferences originating or reversing during the year, and then (3) theamount of pretax financial income.)

Answered: liability at the end manufacturing defe…

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liability at the end manufacturing defe e tax return in 2023- n of temporary diffe oses, ¥7 million of

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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Concept explainers

Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.

Question

E19.17 (LO 1, 2, 4) (Two Differences, One Rate, Beginning
Deferred Balance, Compute Pretax Financial Income) Luo Ltd.
establishes a ¥9o million liability at the end of 2022 for the estimated
litigation settlement for manufacturing defects. All related costs will be
paid and deducted on the tax return in 2023. Also, at the end of 2022, the
company has ¥50 million of temporary differences due to excess
depreciation for tax purposes, ¥7 million of which will reverse in 2023.
The enacted tax rate for all years is 40%, and the company pays taxes of
¥64 million on ¥160 million of taxable income in 2022. Luo expects to have
taxable income in 2023.
Instructions
a. Determine the deferred taxes to be reported at the end of 2022.
b. Indicate how the deferred taxes computed in (a) are to be reported on
the statement of financial position.
c. Assuming that the only deferred tax account at the beginning of 2022
was a deferred tax liability of ¥10,000,000, draft the income tax
expense portion of the income statement for 2022, beginning with the
line "Income before income taxes." (Hint: You must first compute (1)
the amount of temporary difference underlying the beginning
¥10,000,000 deferred tax liability, then (2) the amount of temporary
differences originating or reversing during the year, and then (3) the
amount of pretax financial income.)

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