Fore Farms reported a pretax operating loss of $220 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2021 other than those described above. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. 2. What is the net operating loss reported in 2021 income statement? 3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $245 million. No additional temporary differences originate in 2022.

Fore Farms reported a pretax operating loss of $220 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2021 other than those described above. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. 2. What is the net operating loss reported in 2021 income statement? 3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $245 million. No additional temporary differences originate in 2022.

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

Brown Corp has a deferred tax asset account with balance of $80,000 at the end of 2019 due to a single cumulative temporary difference of $350,000. At the end of 2020, this same temporary difference has increased to cumulative amount of $410,000. Taxable income for 2020 is $800,000. The tax rate is 25% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2019. What one of the following is correct about the journal entry to record Brown's 2020 income tax expense? Group of answer choices Dr. Deferred tax asset $15,000 Dr. Deferred tax liability $25,000 Dr. Income tax expense $200,000 Cr. Tax payable $112,000
Dog
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.…
Pronghorn Inc. incurred a net operating loss of $583,900 in 2023. Combined income for 2020, 2021, and 2022 was $464,400. The tax rate for all years is 30%. Assume that it is more likely than not that the entire tax loss carryforward will not be realized in future years. Assume that Pronghorn earns taxable income of $20,300 in 2024 and that at the end of 2024 there is still too much uncertainty to recognize a deferred tax asset. (a) Prepare the journal entries that are necessary at the end of 2024 assuming that Pronghorn does not use a valuation allowance account. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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.) Year Account Titles and Explanation 2024 2024 (To record current tax expense) (To record current tax benefit) Debit Credit
Fore Farms reported a pretax operating loss of $176 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2022 $ 80 million 2023 $ 56 million Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $208 million. No additional temporary differences originate in 2025.
On December 31, 2022, Dodd, Inc. appropriately changed the company's method of accounting for long-term construction contracts from the percentage-of-completion method to the cost recovery method for financial statement and income tax purposes. The change will result in a €2,300,000 decrease in the beginning Construction in Process at January 1, 2022. Assume a 30% income tax rate. The cumulative effect of this accounting change on the Deferred Tax Liability account is Group of answer choices 1) a decrease of €690,000. 2) an increase of €690,000. 3) a decrease of €1,610,000. 4)an increase of €2,300,000.
Norfolk Southern operates in an industry for which NOL carryback is not allowed, and had the following pretax income (loss) over its first three years of operations 2019 $ 1,200,000 2020 (900,000 ) 2021 1,500,000 For each year there were no deferred income taxes and the tax rate was 25%. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2020. What was Norfolk Southern's income tax expense in 2021?
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $90 million attributable to a temporary book-tax difference of $360 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $272 million. Payne has no other temporary differences. Taxable income for 2021 is $648 million and the tax rate is 25%. Payne has a valuation allowance of $36 million for the deferred tax asset at the beginning of 2021. Required: Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that the deferred tax asset will be realized in full. Prepare the journal entry(s) to record Payne’s income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
Fore Farms reported a pretax operating loss of $200 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $8 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $30 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. 2. What is the net loss reported in 2024 income statement? 3. Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $215 million. No additional temporary differences originate in 2025.
s) In 2022, Demeter, Inc. reported depreciation expense of $1,279,000 and depreciation for tax purposes of $1,534,800. This was the only temporary difference between GAAP and tax and it will reverse equally over the next three years. Assume that the enacted income tax rates are 25% for 2022, 25% for 2023 and 30% for 2024 and 2025. What will Demeter, Inc. report as a deferred tax liability on its 2022 balance sheet? ( 5) $63.950 $51.160 $72.477 O $76,740
Camden Inc. (a property and casualty insurance company) reported taxable income of $150,000 for 2021 and $200,000 for 2022. Tax rate for both years was 25%. However, for 2023, Camden Inc. reported pre-tax accounting loss of $1,000,000 for financial reporting purposes. The pre-tax accounting loss for 2023 included an estimated loss of $250,000 from having accrued a loss contingency. The loss will be paid in 2024 at which time it will be tax deductible. The company decided to carry back its 2023 net operating loss. In 2024 the company developed and introduced a new product that proved to be in high demand. For 2024 the company reported pre-tax accounting income of $900,000. Assume that the tax rates are 30% for 2023 and 40% for 2024 and all future years. REQUIRED: Prepare the income tax journal entries for Camden Inc. at the end of 2023, assuming that at the end of 2023 the company believes it is more likely than not that 30% of deferred tax asset will not be realized. (Show…
Fore Farms reported a pretax operating loss of $210 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Required: Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. What is the net loss reported in 2024 income statement? Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $235 million. No additional temporary differences originate in 2025.