Homework Help is Here – Start Your Trial Now!
Business
Accounting
liability at the end manufacturing defe e tax return in 2023- n of temporary diffe oses, ¥7 million of

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
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.)
Transcribed Image Text: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.)
Expert Solution
steps

Step by step

Solved in 2 steps with 4 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Determination of Tax Liability
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS