P19.4B (LO 1,2,4) (Permanent and Temporary Differences, One Rate) The accounting records of Pinecone Inc. show the following data for 2020: 1. Life insurance expense on officers was $7,000. 2. Equipment was acquired in early January for $450,000. Straight-line depreciation over a 6-year life is used, with no salvage value. For tax purposes, Pinecone used a 30% rate to calculate depreciation. 3. Interest revenue on municipal bonds totaled $3,600. 4. Product warranties were estimated to be $90,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $24,000. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Sales on an accrual basis were $500,000. For tax purposes, $400,000 was recorded on the installment-sales method. 6. Fines incurred for securities violations were $10,600. 7. Pretax financial income was $460,000. The tax rate is 30%. Instructions (a) Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. (b) Prepare the journal entry for 2020 to record income taxes payable, income tax expense, and deferred income taxes.

P19.4B (LO 1,2,4) (Permanent and Temporary Differences, One Rate) The accounting records of Pinecone Inc. show the following data for 2020: 1. Life insurance expense on officers was $7,000. 2. Equipment was acquired in early January for $450,000. Straight-line depreciation over a 6-year life is used, with no salvage value. For tax purposes, Pinecone used a 30% rate to calculate depreciation. 3. Interest revenue on municipal bonds totaled $3,600. 4. Product warranties were estimated to be $90,000 in 2020. Actual repair and labor costs related to the warranties in 2020 were $24,000. The remainder is estimated to be paid evenly in 2021 and 2022. 5. Sales on an accrual basis were $500,000. For tax purposes, $400,000 was recorded on the installment-sales method. 6. Fines incurred for securities violations were $10,600. 7. Pretax financial income was $460,000. The tax rate is 30%. Instructions (a) Prepare a schedule starting with pretax financial income in 2020 and ending with taxable income in 2020. (b) Prepare the journal entry for 2020 to record income taxes payable, income tax expense, and deferred income taxes.

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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14) The records for Ehrlich Co. show this data for 2021: Accrued revenue recorded on the books was $480,000. Revenue cash collections was $320,000. Life insurance on officers was $2,800. Fine for pollution violation was $1,000. Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, accelerated depreciation is used and Ehrlich may deduct 15% for 2021. Interest received on tax exempt Florida State bonds was $9,000. The estimated warranty liability related to 2021 sales was $23,000. Repair costs under warranties during 2021 were $12,000. Pretax financial income is $700,000. The tax rate is 25% for this and future years. Instructions (a) Prepare a schedule starting with pretax financial income and compute taxable income. (b) Prepare the journal entry to record income taxes for 2021. (c ) Show the income statement presentation of income tax expense, starting with "income before tax"
On December 31, 2022, Big Bear Corporation reports liabilities with a tax basis of $1,200,000 and a book basis of $1,700,000. There was no difference in the asset basis. The difference in liability basis arose from temporary differences that would reverse in the following years: 2023 $120,000 2024 $110,000 2025 $112,000 2026 $80,000 2027 $78,000 Assuming a tax rate of 40% for 2022 - 2025 and a rate of 45% for 2026 - 2027, what should Big Bear report on its balance sheet on December 31, 2022? Group of answer choices deferred tax liability of $200,000 deferred tax asset of $207,900 deferred tax liability of $207,900 deferred tax asset of $200,000
Norfolk Southern operates in an industry for which NOL carryback is not allowed, and had the following pretax income (loss) over its first three years of operations 2019 $ 1,200,000 2020 (900,000 ) 2021 1,500,000 For each year there were no deferred income taxes and the tax rate was 25%. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2020. What was Norfolk Southern's income tax expense in 2021?
At the end of its first year of operations on December 31, 2022, the Metro Company reported pretax financial income of $100,000. An investigation of that income revealed the following items:· Bad debts expense of $12,000 was recognized (reported on 2022 income statement). The accounts will be written off (tax deductible) in 2023.· Interest received on municipal bonds: $7,500.· Warranty expenses of $16,000 were accrued for financial reporting purposes, but were not expected to result in a cash payment until 2023.· Depreciation on the tax return exceeded depreciation for financial reporting purposes by $32,000.Assume that any deferred tax assets are considered more likely than not to be realized. The enacted income tax rate for all years is 25%.Required:1) Compute taxable income. Show your calculation. If not, no credit.2) Prepare the entry to record income tax expense and any related assets and liabilities for Metro on December 31, 2022.
s) In 2022, Demeter, Inc. reported depreciation expense of $1,279,000 and depreciation for tax purposes of $1,534,800. This was the only temporary difference between GAAP and tax and it will reverse equally over the next three years. Assume that the enacted income tax rates are 25% for 2022, 25% for 2023 and 30% for 2024 and 2025. What will Demeter, Inc. report as a deferred tax liability on its 2022 balance sheet? ( 5) $63.950 $51.160 $72.477 O $76,740
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.
1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2017-2020. 2. Deferral, for book purposes, of $20,000 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, $300,000. 4. Tax rate for all years, 40%. Instructions (a) Compute taxable income for 2016. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $325,000.
.(BE 18-7) Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2020. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses straight-line depreciation over five years. The enacted tax rate is 25% for all years. This depreciation difference is the only reversing difference the company has. (a) Calculate the amount of capital cost allowance and depreciation expense from 2020 to 2024, as well as the corresponding balances for the carrying amount and undepreciated capital cost of the depreciable assets at the end of each of the years 2020 to 2024. Assume that these assets are considered "eligible equipment" for purposes of the Accelerated Investment Incentive (under the All, instead of using the half-year rule, companies are allowed a first-year deduction using 1.5 times the standard CCA rate). Round to the nearest dollar. (b) Determine the amount of deferred taxes that should be reported in the SFP for…
At the beginning of 20x5, Rundle Ltd. reported a deferred tax liabilty of $300,000. The net book value of the capital assets was $2,600,000, while UCC was $1,600,000. In 20x5, depreciation was $400,000, while CCA was $625,000. The tax rate changed in 20x5 to be 35 %. What is the adjustment required to the deferred taxes?
Fore Farms reported a pretax operating loss of $150 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $20 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2021 other than those described above. Required:1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021.2. What is the net operating loss reported in 2021 income statement?3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $155 million. No additional temporary differences originate in 2022.