Martin Ltd, in the first year of its operations, reported the following information regarding its operations: a. Earnings before tax for the year was $2,500,700 and the tax rate was 38% b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700. c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is the amount deductible. d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes. In the second year of its operations, Martin Ltd. reported the following information: a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%. b. Depreciation was $240,700, and the CCA was $740,700. Net book value at year-end was $1,440.700, while UCC was $1,046,700 c. The estimated costs of the warranty program were $574,700, and the cash paid out was $484,700. The liability had a balance of $256.700 Required: Prepare the journal entry to record income tax expense in the first and second years of operations. The second-year tax rate was not enacted until the second year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Martin Ltd, in the first year of its operations, reported the following information regarding its operations: a. Earnings before tax for the year was $2,500,700 and the tax rate was 38% b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700. c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is the amount deductible. d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes. In the second year of its operations, Martin Ltd. reported the following information: a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%. b. Depreciation was $240,700, and the CCA was $740,700. Net book value at year-end was $1,440.700, while UCC was $1,046,700 c. The estimated costs of the warranty program were $574,700, and the cash paid out was $484,700. The liability had a balance of $256.700 Required: Prepare the journal entry to record income tax expense in the first and second years of operations. The second-year tax rate was not enacted until the second year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 52E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...
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Transcribed Image Text:Martin Ltd, in the first year of its operations, reported the following information regarding its operations:
a. Earnings before tax for the year was $2,500,700 and the tax rate was 38%
b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700.
c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out
was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is
the amount deductible.
d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes.
In the second year of its operations, Martin Ltd. reported the following information:
a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%.
b. Depreciation was $240,700, and the CCA was $740,700. Net book value at year-end was $1,440.700, while UCC was $1,046,700
c. The estimated costs of the warranty program were $574,700, and the cash paid out was $484,700. The liability had a balance of
$256.700
Required:
Prepare the journal entry to record income tax expense in the first and second years of operations. The second-year tax rate was not
enacted until the second year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account
field.)
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