Temporary Difference Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference. Deferred Tax Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year. Deferred tax liability When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability. To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

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Answer 1

Question

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

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Exercise 16-6 (Algo) Temporary difference; income tax payable given [LO16-3] In 2024, DFS Medical Supply collected rent revenue for 2025 tenant occupancy. For income tax reporting, the rent is taxed when collected. For financial statement reporting, the rent is recorded as deferred revenue and then recognized as revenue in the period tenants occupy the rental property. The deferred portion of the rent collected in 2024 amounted to $390,000 at December 31, 2024. DFS had no temporary differences at the beginning of the year. Required: Assuming an income tax rate of 25% and 2024 income tax payable of $940,000, prepare the journal entry to record income taxes for 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet

3

Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8] Skip to question [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and…

Answer 2

Question

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

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Answer 3

Question

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

Expert Solution & Answer

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Answer 4

Question

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

Expert Solution & Answer

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Answer 5

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

Answer 6

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

Answer 7

Chapter 16, Problem 16.3P

1.

To determine

Temporary Difference

Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To prepare: The journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

Answer 8

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

Answer 9

2.

To determine

To prepare: The journal entry to record the income taxes in 2019.

Answer 10

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

Answer 11

3.

To determine

The appropriate balance in the deferred tax liability account at the end of 2019.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 16 - Prob. 16.1Q Ch. 16 - A deferred tax liability (or asset) is described...Ch. 16 - Prob. 16.3Q Ch. 16 - Prob. 16.4Q Ch. 16 - Temporary differences result in future taxable or...Ch. 16 - Identify three examples of differences with no...Ch. 16 - The income tax rate for Hudson Refinery has been...Ch. 16 - Suppose a tax reform bill is enacted that causes...Ch. 16 - A net operating loss occurs when tax-deductible...Ch. 16 - Prob. 16.10Q

Solution Summary: The author describes the journal entry to record the income taxes in 2018 assuming no difference between accounting and taxable income.

Concept explainers

To prepare: The journal entry to record the income taxes in 2019.

The appropriate balance in the deferred tax liability account at the end of 2019.

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Chapter 16 Solutions