The following information applies to Pharoah Corporation, which reports under IFRS.1.Prior to 2022, taxable income and accounting income were identical.2Accounting income was $1.7 million in 2022 and $1.41 million in 2023.3.On January 1, 2022, equipment costing $1.59 million was purchased. It is being depreciated on a straight-line basis over eightyears for financial reporting purposes, and is a Class 8-20% asset for tax purposes.4.Tax-exempt interest income of $70,000 was received in 2023.5.The tax rate is 30% for all periods.6.Taxable income is expected in all future years.7.Pharoah had 100,000 common shares outstanding throughout 2023.(a)Your answer is partially correct.Calculate the amount of capital cost allowance and depreciation expense for 2022 and 2023, and the corresponding carryingamount and undepreciated capital cost of the depreciable assets at the end of 2022 and 2023.20222023Capital CostAllowance159000286200+AUndepreciatedCapital Cost14310001144800EADepreciationExpense198750198750Net BooktA

Spreading the cost of capital assets across their useful life, or CCA, enables organizations to more…

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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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Sunland Corporation follows IFRS. Prior to 2022, the accounting income and taxable income for Sunland were the same. On January 1, 2022, the company purchased equipment at a cost of $1,224,000. For accounting purposes, the equipment was to be depreciated over six years using the straight-line method and no residual value. For income tax purposes, the equipment was subject to a CCA rate of 30% and was eligible for the Accelerated Investment Incentive (1.5 times the CCA rate applies for 2022). Sunland's income before tax for accounting purposes for 2023 was $13,000,000. The company was subject to a 20% income tax rate for all applicable years and anticipated profitable years for the foreseeable future. (a) Calculate the amount of the temporary difference for equipment and net change in deferred tax asset/liability. LA Net change in deferred tax asset/liability $
Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2017 due to a single cumulative temporary difference of $375,000. At the end of 2018, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2018 is $850,000. The tax rate is 40% for all years.Instructions(a) Record income tax expense, deferred income taxes, and income taxes payable for 2018, assuming that it is probable that the deferred tax asset will be realized.(b) Assuming that it is probable that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2018 to recognize this probability.
The information that follows pertains to Esther Food Products: a. At December 31, 2024, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation Prepaid expenses Warranty expenses b. No temporary differences existed at the beginning of 2024. c. Pretax accounting income was $46,000 and taxable income was $9,000 for the year ended December 31, 2024. d. The tax rate is 25%. Required: Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2024. Complete this question by entering your answers in the tabs below. Calculation General Journal $ 32,000 11,000 (6,000) Complete the following table given below to record income taxes for 2024. Note: Amounts to be deducted should be entered with a minus sign. Description Pretax accounting income Permanent differences Income subject to taxation Temporary Differences Income taxable in current year $ Amount 46,000 X Tax Rate = x X Recorded as:
Ayres Services acquired an asset for $144 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset/s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: _ ($ in millions) ____________ 2021 2022 2023 2024 Pretax accounting income $370 $390 $405 $440 Depreciation on the income statement 36 36 36 36 Depreciation on the tax return (57) (49) (23) (15) Taxable income…
(Two Differences, 2 Years, Compute Taxable Income and Pretax Financial Income) The following information was disclosed during the audit of Elbert Inc. 1. Year Amount due per Tax Return 2017 $130,000 2018 104,000 2. On January 1, 2017, equipment costing $600,000 is purchased. For financial reporting purposes, the company uses straightline depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life.(Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.)3. In January 2018, $225,000 is collected in advance rental of a building for a 3-year period. The entire $225,000 is reported as taxable income in 2018, but $150,000 of the $225,000 is reported as unearned revenue in 2018 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2019 and 2020.4. The tax rate is 40% in 2017 and all subsequent periods. (Hint: To find taxable income in…
The books of Chicago Company for the year ended December 31, 2020 showed pretax income of P720,000. In computing the taxable income for income tax purposes, the following temporary differences were taken into account.Depreciation deducted for tax purposes in excess of depreciation recorded in the books- P32,000Income from installment sales reportable for tax purposes in excess of income recognized in the books- P24,0001. What amount should Chicago Company record as current income tax liability at December 31, 2020 assuming a corporate income tax rate of 30%?
Ayres Services acquired an asset for $112 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income Depreciation on the income $350 $370 $385 $420 28 28 28 28 statement Depreciation on the tax return (53) (29) (19) (11) Taxable income $325 $369 $394 $437 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal place (i.e., 5,500,000 should be entered as 5.50).) Beginning of 2021 End of 2021 End of 2022…
Caramel Co. at the end of 2022, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income -$3,000,000 Estimated litigation expense- 4,000,000 Excess tax depreciation- (6,000,000) Taxable Income- $1,000,000 The estimated litigation expense of $4,000,000 will be deductible in 2023 when it is expected to be paid. The depreciable assets will result in deductible amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. Income taxes payable for 2022 is
The information that follows pertains to Esther Food Products: a. At December 31, 2024, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation Prepaid expenses Warranty expenses $ 52,000 22,000 (19,000) b. No temporary differences existed at the beginning of 2024. c. Pretax accounting income was $74,000 and taxable income was $19,000 for the year ended December 31, 2024. d. The tax rate is 25%. Required: Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2024. Complete this question by entering your answers in the tabs below. Calculation General Journal Complete the following table given below to record income taxes for 2024. Note: Amounts to be deducted should be entered with a minus sign. Description Pretax accounting income Permanent differences Income subject to taxation Temporary Differences Income taxable in current year Calculation General Journal Amount Tax Rate $…
Lanco Corporation, an accrual-method corporation, reported taxable income of $1,720,000 this year and paid Federal income tax of $361,200. Included in the computation of taxable income were the following items: • MACRS depreciation of $253,000. Depreciation for earnings and profits purposes is $124,000. • A net capital loss carryover of $13,700 from last year. • A net operating loss carryover of $31,000 from last year. $76,750 capital gain from the distribution of land to the company's sole shareholder (see below). Not included in the computation of taxable income were the following items: • Tax-exempt income of $8,600. • Life insurance proceeds of $267,000. • Excess current-year charitable contribution of $2,300 (to be carried over to next year). • Tax-deferred gain of $21,300 on a like-kind exchange. • Nondeductible life insurance premium of $4,700. • Nondeductible interest expense of $3,600 on a loan used to buy tax-exempt bonds. . Lanco's accumulated E&P at the beginning of the…
Lanco Corporation, an accrual-method corporation, reported taxable income of $1,460,000 this year. Included in the computation of taxable income were the following items: MACRS depreciation of $200,000. Depreciation for earnings and profits purposes is $120,000.A net capital loss carryover of $10,000 from last year.A net operating loss carryover of $25,000 from last year.$65,000 capital gain from the distribution of land to the company’s sole shareholder (see below).Not included in the computation of taxable income were the following items: Tax-exempt income of $5,000.Life insurance proceeds of $250,000.Excess current-year charitable contribution of $2,500 (to be carried over to next year).Tax-deferred gain of $20,000 on a like-kind exchange.Nondeductible life insurance premium of $3,500.Nondeductible interest expense of $1,000 on a loan used to buy tax-exempt bonds.Lanco’s accumulated E&P at the beginning of the year was $2,400,000. During the year, Lanco made the following…
The following facts relate to Sandhill Corporation. 1. Deferred tax liability, January 1, 2025, $33,000. 2. Deferred tax asset, January 1, 2025, $11,000. 3. Taxable income for 2025, $115,500. 4. 5. 6. 7. Cumulative temporary difference at December 31, 2025, giving rise to future taxable amounts, $253,000. Cumulative temporary difference at December 31, 2025, giving rise to future deductible amounts, $104,500. Tax rate for all years, 20%. No permanent differences exist. The company is expected to operate profitably in the future. (a) X Your answer is incorrect. Compute the amount of pretax financial income for 2025. Pretax financial income $ 116875

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