Recording Multiple Temporary Differences, Change in Enacted Tax Rate Wittco Company reports pretax GAAP income in Year 1, its first year of operations, of $350,000. Temporary differences in the GAAP basis and tax basis of assets arose during the year from the following two sources. Prepayment of Year 2 rent in the amount of $84,000 in Year 1. instaliment sale totaling $126,000, with cash collections expected in two equal amounts in Year 3 and Year 4. The enacted tax rates are 25% in Year 1, 30% in Year 2, and 40% in Year 3 and thereafter. Required a. Record the income tax journal entry on December 31 of Year 1. Date Dec 31, Year 1 Income Tax Expense Deferred Tax Liability Income Tax Payable To record income tax expense Account Name Dr. 65,600 0 0 Cr. 0 30,600 35,000 b. Record the income tax journal entry on December 31 of Year 1, assuming that a new tax law is passed in Year 1 decreasing the tax rate to 20% for Year 1 and all years thereafter.

Recording Multiple Temporary Differences, Change in Enacted Tax Rate Wittco Company reports pretax GAAP income in Year 1, its first year of operations, of $350,000. Temporary differences in the GAAP basis and tax basis of assets arose during the year from the following two sources. Prepayment of Year 2 rent in the amount of $84,000 in Year 1. instaliment sale totaling $126,000, with cash collections expected in two equal amounts in Year 3 and Year 4. The enacted tax rates are 25% in Year 1, 30% in Year 2, and 40% in Year 3 and thereafter. Required a. Record the income tax journal entry on December 31 of Year 1. Date Dec 31, Year 1 Income Tax Expense Deferred Tax Liability Income Tax Payable To record income tax expense Account Name Dr. 65,600 0 0 Cr. 0 30,600 35,000 b. Record the income tax journal entry on December 31 of Year 1, assuming that a new tax law is passed in Year 1 decreasing the tax rate to 20% for Year 1 and all years thereafter.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Recording and Reporting Temporary and Permanent Differences The records of Lane Corporation show the following pretax GAAP income for the past 4 years. Year 1 Year 2 Year 3 Year 4 Pretax GAAP income $90,000 $92,000 $95,000 $98,000 The income tax rate is 25%. The company had the following differences between GAAP basis and tax basis income. For GAAP purposes, installment sales receivable is $30,000 on December 31 of Year 1. On the tax return, $10,000 will be recognized each year, Year 2 through Year 4, as cash is collected. •For GAAP purposes, warranty expenses of $4,000 are accrued in Year 1. On the tax return, $1,000 will be deducted each year, Year 1 through Year 4, as expenditures are made related to warranties. The company also recorded interest revenue of $1,250 each year on municipal bonds, which is not taxable. Required Schedules Journal Entries Financial Statement Presentation c. Prepare the journal entries to record income tax expense for Year 1, Year 2, Year 3, and Year 4.…
For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Pretax accounting income $ 300,000 Permanent difference (15,000 ) 285,000 Temporary difference-depreciation (20,000 ) Taxable income $ 265,000 Tringali's tax rate is 25%. Assume that no estimated taxes have been paid. What should Tringali report as its deferred income tax liability as of the end of its first year of operations?
Stone Company reported pre-tax book income of $700,000 in 20X1, the first year of operation. The tax depreciation exceeded the book depreciation by $90,000. The tax rate for 20X1 and all future years was 21%. What amount of deferred tax liability should Stone report in its December 31, 20X1, balance sheet? Select one: a. $6,300 b. $14,000 c. $18,900 d. $3,500
Accounting income or loss for Aberdeen Corporation, following IFRS, is below: Year Accounting income/(loss) Tax rate percent Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 $160,000 250,000 80,000 (160,000) (380,000) 130,000 145,000 30 30 25 25 25 25 25 Assume that there were no permanent or temporary differences between accounting and taxable income. Required Prepare the tax-related journal entries for Year 3 to Year 7. Aberdeen Corporation believes that it will be able to use any loss carryforward in future years. Aberdeen Corporation will apply the available carryback provisions to the earliest years first. Include your calculations.
Do not give answer in image and hand writing
Recording Income Tax Expense Rangee Rover Inc. had taxable income of $218,500 for the year. The GAAP basis of accounts receivable (net) is $13,800 less than the tax basis of accounts receivable. Assuming a tax rate of 25%, record the income tax journal entry on December 31. Assume zero beginning balances in deferred tax accounts. • Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Account Name Cr. Dec. 31 Income Tax Expense Deferred Tax Liability Income Tax Payable N/A To record income tax expense. > > Dr. 54,625 0 0 O 0x 13,800 * 40,825 * 0
Subject: accounting
Beaver Dam Inc. (BDI) listed the following items to prepare a reconciliation between book and taxable income. GAAP net income before tax $700,000 Meal and entertainment expense 100,000 GAAP depreciation expense 110,000 Depreciation expense for tax purposes 120,000 c. Compute the net increase in BDI’s deferred tax assets or deferred tax liabilities for the year. d. Prepare the journal entry to record taxes for the year.
DEF Co. reported taxable income of P8M in its income tax return for the 1st year of operations. The entity revealed the following temporary differences between financial income and taxable income for the year:Tax depreciation in excess of book depreciation, P800,000Accrual for product liability claim in excess of actual claim, P1,200,000Reported installment sales income in excess of taxable installment sales income, P2,600,000Income tax rate, 30%Compute for the deferred tax expense for the 1st year
Tyson Corporation reported pretax income from operations in Year 1 of 92,000 (the first year of operations). In Year 2, the corporation experienced a $96,000 NOL (pretax loss from operations). Management is confident the company will have taxable income in excess of $120,000 in Year 3. Assume an income tax rate of 25% in Year 1 and thereafter. Tyson has no other temporary differences. Required a. Provide the Year 1 and Year 2 income tax entries that Tyson should make.
Subject: accounting
i. Compute taxable income for 2018. ii. Compute the deferred taxes at December 31, 2018, that relate to the temporary differences described above. Clearly label them as deferred tax asset or liability.