Sound Wave Electronics' only depreciable asset had a financial reporting carrying value exceeding its tax basis by $200,000 as of December 31, 2022. This difference arose due to straight-line depreciation for financial reporting purposes and MACRS for tax purposes. The asset was acquired earlier in the year. Sound Wave Electronics has no other temporary differences. The enacted tax rate is 25% for 2022 and 35% thereafter. How should the deferred tax effect of this difference be reported on the December 31, 2022, balance sheet? a) A liability of $50,000 b) A liability of $70,000 c) A liability of $50,000 d) An asset of $70,000

Sound Wave Electronics' only depreciable asset had a financial reporting carrying value exceeding its tax basis by $200,000 as of December 31, 2022. This difference arose due to straight-line depreciation for financial reporting purposes and MACRS for tax purposes. The asset was acquired earlier in the year. Sound Wave Electronics has no other temporary differences. The enacted tax rate is 25% for 2022 and 35% thereafter. How should the deferred tax effect of this difference be reported on the December 31, 2022, balance sheet? a) A liability of $50,000 b) A liability of $70,000 c) A liability of $50,000 d) An asset of $70,000

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 5MC: At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial...

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At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $158,000 at December 31, 2021. This was a result of differences between straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The asset was acquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 25% for 2021 and 37% thereafter. Boze should report the deferred tax effect of this difference in its December 31, 2021, balance sheet as: O An asset of $56,680. O A liability of $56,680. O A liability of $58,460. O An asset of $58,460.
On December 31, 2021, Winston Inc. has determined that it is more likely than not that $258000 of a $611000 deferred tax asset will not be realized. The journal entry to record this reduction in asset value will include a O debit to Income Tax Payable of $258000. O credit to the Allowance to Reduce Deferred Tax Asset to Expected Realizable Value of $258000. O credit to Income Tax Expense for $353000. Odebit to Income Tax Expense for $353000
Due to differences between depreciation reported in the income statement and depreciation deducted for tax purposes, Lucas Corp. has $2 million in temporary differences that will increase taxable Income next year. Assuming that Lucas has no other temporary differences, deferred income taxes should be reported in this year's ending balance sheet as a: Multiple Choice Current deferred asset. Noncurrent deferred tax asset. Current deferred tax liability. Noncurrent deferred tax Iliability. Finacial Acco..pages student-s-reque...pdf Finacial-Accoun...pdf Finacial Acco...pages -pdf Removed
Shwonson Industries reported a deferred tax asset of $9.75 million for the year ended December 31, 2020, related to a temporary difference of $39 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020–2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $49 million. Required:1. Prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021.2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson’s 2021 net income?
Shwonson Industries reported a deferred tax asset of $5.50 million for the year ended December 31, 2020, related to a temporary difference of $22 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020-2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $32 million. Required: 1. Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. 2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson's 2021 net income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. (If no entry is required for a transaction/event, select "No journal entry…
Due to differences between depreciation reported in the income statement and depreciation deducted for tax purposes, Lucas Corp. has $2 million in temporary differences that will increase taxable income next year. Assuming that Lucas has no other temporary differences, deferred income taxes should be reported in this year's ending balance sheet as a______?
Skysong, Inc. has a deferred tax asset account with a balance of $257,100 at the end of 2024 due to a single cumulative temporary difference of $857,000. At the end of 2025 this same temporary difference has decreased to a cumulative amount of $757,000. Taxable income for 2025 is $657,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2024. (a) Record income tax expense, deferred income taxes, and income taxes payable for 2025, assuming that it is more likely than not that the deferred tax asset will be realized. (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 O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit (b) Assuming that it is more likely than not that one-half of the deferred tax asset will not be realized, prepare the…
Marin Corp. has a deferred tax asset account with a balance of $80,800 at the end of 2024 due to a single cumulative temporary difference of $404,000. At the end of 2025, this same temporary difference has increased to a cumulative amount of $430,000. Taxable income for 2025 is $801,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2024. (a) Record income tax expense, deferred income taxes, and income taxes payable for 2025, assuming that it is more likely than not that the deferred tax asset will be realized. (List all debit entries before credit entries. 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 O for the amounts.) Account Titles and Explanation Debit Credit (b) Assuming that it is more likely than not that $5,200 of the deferred tax asset will not be realized, prepare the journal…
Sheridan corporation reports pretax financial income of $73,500 for 2025. The following items cause taxable income to be different than pretax financial income. 1. Depreciation on the tax return is greater than depreciation on th eincome statement by $17,600 2. Rent collected on the tax return is greater than rent recognized on the income statement by $19,900 3. Fines for pollution appear as an expense of $10,500 on the income statement Sheridan's tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2025. Compute taxable income and income taxes payable for 2025
Shwonson Industries reported a deferred tax asset of $775 million for the year ended December 31, 2020, related to a temporary difference of $31 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020-2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $41 million. Required: 1. Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. 2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson's 2021 net income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry to record Shwonson's income tax expense in 2021. (If no entry is required for a transaction/event, select "No journal entry required"…
Wildhorse, Inc. has a deferred tax asset account with a balance of $262,200 at the end of 2024 due to a single cumulative temporary difference of $874,000. At the end of 2025 this same temporary difference has decreased to a cumulative amount of $774,000. Taxable income for 2025 is $674,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2024. (a) Record income tax expense, deferred income taxes, and income taxes payable for 2025, assuming that it is more likely than not that the deferred tax asset will be realized. (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 O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit