Shannon, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2017. The increase in the prior year’s income before taxes is $1,200,000. The tax rate is 40%. Prepare Shannon’s 2017 journal entry to record the change in accounting principle

Shannon, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2017. The increase in the prior year’s income before taxes is $1,200,000. The tax rate is 40%. Prepare Shannon’s 2017 journal entry to record the change in accounting principle

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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At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,300 (revenues of $351,500 and expenses of $231,200); gain on disposal of Division F, $24,000; loss from operations of discontinued Division F, $11,500; and prior period adjustment, $14,100, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,600. Norris had a retained earnings balance of $161,300 on January 1, 2016, and declared and paid cash dividends of $32,800 during 2016. Required: 1.…
Ocean Ltd recorded an accounting profit before tax of $50,000 for the year ended 30 June 2020. Included in the accounting profit were the following income and expenses: Rent revenue Interest revenue Bad debts expense An extract of the Statement of Financial Position for 30 June 2020 revealed the following: Accounts receivable Allowance for doubtful debts Interest receivable Rent Revenue in Advance $46,000 $28,000 $34,000 The company tax rate is 30%. 2020 $96,000 ($44,000) $40,000 $22,000 2019 $56,000 ($18,000) $24,000 $38,000 Required: Calculate taxable income (loss) and record the necessary journal entry for current income tax expense for the year ended 30 June 2020.
In 2018, Kardashian Inc. reported pretax accounting income of $240,000. In 2019, the company had a profit of $120,000. In 2020, the company lost $560,000. The following year, the company's accounting income was $440,000. Income for tax purposes was the same as for accounting for all years. Kardashian's tax rate was 32% for 2018 and 2019, 33% for 2020, and 34% for 2021 and subsequent years. The tax rates were all enacted by the beginning of 2018. REQUIRED: Prepare the journal entries for the years 2018 to 2021 to record income taxes. Assume that Kardashian's policy is to carry back any tax losses first, and that at the end of 2021, the loss carryforward benefits are judged more likely than not to be realized in the future.
Sandhill, Inc., changed from the LIFO cost flow assumption to the FIFO cost flow assumption in 2020. The increase in the prior year's income before taxes is $1,127,000. The tax rate is 20%. Prepare Sandhill's 2020 journal entry to record the change in accounting principle. (Credit account 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 0 for the amounts.) Account Titles and Explanation Debit Credit
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In 2021, Winslow International, Inc.’s controller discovered that ending inventories for 2019 and 2020 were overstated by $220,000 and $520,000, respectively.Determine the effect of the errors on retained earnings at January 1, 2021. (Ignore income taxes.)
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