Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock Exchanges. Melissa has chosen to prepare consolidated financial statements in accordance with U.S. GAAP for filing with the U.S. Securities and Exchange Commission but must also prepare consolidated financial statements in accordance with IFRS in accordance with European Union regulations. On December 31, 20XO, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an asset's depreciable base in 20X1. This is the only building that Melissa owns. At the end of 20X1, Melissa had the building appraised by a qualified real estate appraiser, who estimated the fair value of the building to be $1,172,500. Melissa Intends to occupy the building itself, and, therefore, the building is classified as property, plant, and equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient Income in the future to recover any deferred tax assets that might be recognized. Model used for subsequent measurement Pre-tax income before depreciation and revaluation charge. Enacted tax rate U.S. GAAP Cost $500,000 21% Required: 1. Calculate Melissa's taxable income In 20X1. 2. Prepare the Journal entry to record Melissa's 20X1 Income tax activity under U.S. GAAP. 3. Prepare the journal entry to record Melissa's 20X1 Income tax activity under IFRS. Answer is not complete. Complete this question by entering your answers in the tabs below. IFRS Revalued at fair value $500,000 21%
Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock Exchanges. Melissa has chosen to prepare consolidated financial statements in accordance with U.S. GAAP for filing with the U.S. Securities and Exchange Commission but must also prepare consolidated financial statements in accordance with IFRS in accordance with European Union regulations. On December 31, 20XO, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an asset's depreciable base in 20X1. This is the only building that Melissa owns. At the end of 20X1, Melissa had the building appraised by a qualified real estate appraiser, who estimated the fair value of the building to be $1,172,500. Melissa Intends to occupy the building itself, and, therefore, the building is classified as property, plant, and equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient Income in the future to recover any deferred tax assets that might be recognized. Model used for subsequent measurement Pre-tax income before depreciation and revaluation charge. Enacted tax rate U.S. GAAP Cost $500,000 21% Required: 1. Calculate Melissa's taxable income In 20X1. 2. Prepare the Journal entry to record Melissa's 20X1 Income tax activity under U.S. GAAP. 3. Prepare the journal entry to record Melissa's 20X1 Income tax activity under IFRS. Answer is not complete. Complete this question by entering your answers in the tabs below. IFRS Revalued at fair value $500,000 21%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock Exchanges. Melissa has chosen to
prepare consolidated financial statements in accordance with U.S. GAAP for filing with the U.S. Securities and Exchange Commission
but must also prepare consolidated financial statements in accordance with IFRS in accordance with European Union regulations.
On December 31, 20X0, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting
purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses
straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an asset's
depreciable base in 20X1. This is the only building that Melissa owns.
At the end of 20X1, Melissa had the building appraised by a qualified real estate appraiser, who estimated the fair value of the building
to be $1,172,500. Melissa Intends to occupy the building itself, and, therefore, the building is classified as property, plant, and
equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the
Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient Income in the future to recover any
deferred tax assets that might be recognized.
Model used for subsequent measurement
Pre-tax income before depreciation and revaluation charge
Enacted tax rate
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required:
1. Calculate Melissa's taxable income in 20X1.
2. Prepare the journal entry to record Melissa's 20X1 Income tax activity under U.S. GAAP.
3. Prepare the journal entry to record Melissa's 20X1 Income tax activity under IFRS.
Req 1
No
1
2
Req 2A and 3A Req 2B and 38
2-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under U.S. GAAP.
3-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under IFRS.
(If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
General Journal
Credit
Transaction
1
2
Tax expense - deferred
Tax expense - current
Tax payable
Deferred tax liability
Tax expense - current
Deferred tax asset
Tax expense - deferred
Deferred tax liability
Tax payable
U.S. GAAP
Cost
$500,000
3333
21%
33333
Debit
IFRS
Revalued at
fair value
$500,000
21%
6,720 →
91,560
31,290
36,855
30,135 X
91,580
8,720
6,720
91,560
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