On January 2, 2021, Tobias Company began ųsing straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2021, the amount of the change in accumulated depreciation is $42,500. The appropriate tax rate is 25%. The separately reported change in 2021 earnings is: Multiple Choice An increase of $42,500. A decrease of $42,500. An increase of $31,875. None of these answer choices are correct. 身

On January 2, 2021, Tobias Company began ųsing straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2021, the amount of the change in accumulated depreciation is $42,500. The appropriate tax rate is 25%. The separately reported change in 2021 earnings is: Multiple Choice An increase of $42,500. A decrease of $42,500. An increase of $31,875. None of these answer choices are correct. 身

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 4MC: Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the...

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Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax income from continuing operations (of which revenues are 295,000), the following items are included in this pretax income: Colts taxable income totals 93,000 in 2019. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2019, Colt had a retained earnings balance of 310.000 and a deferred tax liability of 8,100. During 2019, Colt declared and paid dividends of 48,000. It is subject to tax rates of 15% on the first 50,000 of income and 30% on income in excess of 50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2019 ending deferred tax liability is 14,100. Required: 1. Prepare a schedule for Colt to allocate the total 2019 income tax expense to the various components of pretax income. 2. Prepare Colts income tax journal entry at the end of 2019. 3. Prepare Colts 2019 income statement. 4. Prepare Colts 2019 statement of retained earnings. 5. Show the related income tax disclosures on Colts December 31, 2019, balance sheet.
Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350
On January 2, 2024, Tobias Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2024, the amount of the change in accumulated depreciation is $47,500. The appropriate tax rate is 25%. The separately reported change in 2024 earnings is:
Due to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $54 million as of December 31, 2024. Crote has a tax rate of 20%. Crote's retained earnings as of December 31, 2024, would be:
Crown Inc. reported P1,900,000 net income for the quarter ended September 30, 2021 which included the following after tax items: A P1,200,000 expropriation gain, realized on April 30, 2021, was allocated equally to the 2nd, 3rd and 4th quarters of 2021. A P300,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on August 1, 2021. On February 1, 2021, Peras Inc. paid P960,000 for 2021 calendar-year property taxes. One-fourth of the property taxes paid was allocated to the 3rd quarter of 2021. What amount should be reported as net income for the quarter ended September 30, 2021? A. 900,000B. 1,250,000C. 1,800,000D. 1,600,000
Foster Company reported pretax financial income of $350,000 for 2021. Foster uses an accelerated form of depreciation for tax purposes, and it exceeds book depreciation by $50,000. The tax rate for 2021 is 20%. Record the journal entry at the end of 2021, be sure to include calculations, as well as income tax expense, a deferred account, and income tax payable.
Atis Inc. reported P 3,800,000 net income for the quarter ended September 30, 2021 which included the following after tax items: A P 2,400,000 expropriation gain, realized on April 30, 2021, was allocated equally to the 2nd, 3rd and 4th quarters of 2021. A P 600,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on August 1, 2021. On February 1, 2021, Atis Inc. paid P1,920,000 for 2021 calendar-year property taxes. One-fourth of the property taxes paid was allocated to the 3rd quarter of 2021. What amount should be reported as net income for the quarter ended September 30, 2021?A. 900,000B. 1,600,000C. 3,600,000D. 1,800,000
Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $6 million as of December 31, 2018. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2018, would be (Round million answer to 2 decimal places.):
Current Attempt in Progress In 2023, Crane Ltd., which follows IFRS, reported accounting income of $960,000 and the 2023 tax rate was 20%. Crane had two timing differences for tax purposes: CCA on the company's tax return was $450,000. Depreciation expense on the financial statements was $280,000. These amounts relate to assets that were acquired on January 1, 2023, for $1,800,000. Accrued warranty expense for financial statement purposes was $132,000 (accrued expenses are not deductible for tax purposes). This is the first year Crane offers warranties. Both of these timing differences are expected to fully reverse over the next four years, as follows: Year 2024 2025 2026 2027 (a) Depreciation Difference $55,000 45,000 40,000 30,000 Warranty Expense Rate $18,000 20% 28,000 20% 38,000 18% 48.000 18% $170.000 $132,000 Calculate income taxes payable for 2023. Income taxes payable $
The following information is available for Pina Corporation for 2019 (its first year of operations). 1. Excess of tax depreciation over book dapreciation, $38,400. This $38,400 difference will reverse squally over the years 2020-2023. 2. Deferral, for book purposes, of $20,800 of rentrecsived in advance. The rent will be recognized in 2020. 3. Pretax financial income, $284,000. 4. Tax rate for all yaars, 20%. Computa taxable income for 2019. Taxable incoma eTextbook and Medla List of Accounts Prepare the journal antry to record income taxepense, daferred income taxes, and income taxas payable for 2019. (Credit occount titles are automatically indented when amount is entered. Do not indent manually if no entry is required, select "No Entry" for the account titles and enter O for the amcunts) Account Titles and Explanation Debit Credit eTextbook and Medla List of Accounts Prepare the journal antry to record income tax oxpense, deferred income taxes, and income taxas payable for 2020,…
Pretax financial income for Lake Inc. is $300,000, and itstaxable income is $100,000 for 2018. Its only temporarydifference at the end of the period relates to a $70,000 differencedue to excess depreciation for tax purposes. If thetax rate is 40% for all periods, compute the amount ofincome tax expense to report in 2018. No deferred incometaxes existed at the beginning of the year.