General Accounting The financial reporting carrying value of Boze Music'sonly depreciable asset exceeded its tax basis by$150,000 at December 31, 2011. This was a result ofdifferences between straight-line depreciation forfinancial reporting purposes and MACRS for taxpurposes. The asset was acquired earlier in the year.Boze has no other temporary differences. Theenacted tax rate is 30% for 2011 and 40% thereafter.Boze should report the deferred tax effect of thisdifference on its December 31, 2011 balance sheet as:a) A liability of $45,000b) A liability of $60,000c) A liability of $45,000d) An asset of $60,000

Step 1: Introduction to the Deferred Tax LiabilityDeferred tax liability is a tax due for the…

Answered: The financial reporting carrying value…

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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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.
Horner Corporation has a deferred tax asset at December 31, 2015 of $80,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 40% for 2012-2014; 35% for 2015; and 30% for 2016 and thereafter. Assuming that management expects that only 60% of the related benefits will actually be realized, a valuation account should be established in the amount of: a. $80,000 b. $32,000 C. $28,000 d. $24,000 Use the following information for questions 5 and 6. Rowen, Inc. had pre-tax accounting income of $1,672,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions: 4. Received rent from Jane, Co. for 2016 Municipal bond income Depreciation for tax purposes in excess of book depreciation Installment sales revenue to be collected in 2016 5. For 2015, what is the amount of income taxes payable for Rowen, Inc? $603,200 $654,400 $686,400 $772,800 a. b. $64,000 $80,000…
Horner Corporation has a deferred tax asset at December 31, 2015 of $80,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 40% for 2012–2014; 35% for 2015; and 30% for 2016 and thereafter. Assuming that management expects that only 60% of the related benefits will actually be realized, a valuation account should be established in the amount of: a. $80,000 b. $32,000 c. $28,000 d. $24,000
On December 31, 2017, Winston Inc. has determined that it is more likely than not that $240,000 of a $600,000 deferred tax asset will not be realized. The journal entry to record this reduction in asset value will include a debit to Income Tax Payable of $240,000. credit to the Allowance to Reduce Deferred Tax Asset to Expected Realizable Value of $240,000. debit to Income Tax Expense for $360,000. credit to Income Tax Expense for $360,000
In 2023, HD had reported a deferred tax asset of $226 million with no valuation allowance. At December 31, 2024, the account balances of HD Services showed a deferred tax asset of $290 million before assessing the need for a valuation allowance and income taxes payable of $114 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2024. What amount should HD report as income tax expense in its 2024 income statement? Note: Round your calculations to the nearest whole million.
At the beginning of 2025, Pronghorn Construction Company changed from the cost-recovery method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the cost- recovery method for tax purposes. For years prior to 2025, pretax income under the two methods was as follows: percentage-of-completion $114,200, and cost-recovery $78,200. The tax rate is 40%. Pronghorn has a profit-sharing plan, which pays all employees a bonus at year-end based on 2% of pretax income. Compute the indirect effect of Pronghorn's change in accounting principle that will be reported in the 2025 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers. Indirect effect
At the end of 2015, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2016, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2016 is $180 million and the tax rate is 40%. Required: 1. Prepare the journal entry(s) to record Payne’s income taxes for 2016, assuming it is more likely than not that the deferred tax asset will be realized. 2. Prepare the journal entry(s) to record Payne’s income taxes for 2016, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized.
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 $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…
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?
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
Sheridan Company reports pretax financial income of $73,500 for 2025. The following items cause taxable income to be different than pretax financial income. Depreciation on the tax return is greater than depreciation on the income statement by $17,600. 1. 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. (a) Your answer is correct. Compute taxable income and income taxes payable for 2025. (b) Taxable income 86300 Income taxes payable 25890 eTextbook and Media Solution Pretax financial income for 2025 $73,500 Excess depreciation per tax return (17,600) Excess rent collected over rent earned 19,900 Nondeductible fines 10,500 Taxable income $86,300 Taxable income $86,300 Enacted tax rate 30%…

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