Interpreting Income Tax Disclosures. The financial statements of ABC Corporation, a retail chain, reveal the information for income taxes shown in Exhibit 2.15. REQUIRED a. Assuming that ABC had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for 2013? Explain. b. Did income before taxes for financial reporting exceed or fall short of taxable income for 2014? Explain. c. Will the adjustment to net income for deferred taxes to compute cash flow from operations in the statement of cash flows result in an addition or a subtraction for 2013? For 2014? d. ABC does not contract with an insurance agency for property and liability insurance; instead, it self-insures. ABC recognizes an expense and a liability each year for financial reporting to reflect its average expected long-term property and liability losses. When it experiences an actual loss, it charges that loss against the liability. The income tax law permits self-insured firms to deduct such losses only in the year sustained. Why are deferred taxes related to self-insurance disclosed as a deferred tax asset instead of a deferred tax liability ? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2012 and 2014. e. ABC treats certain storage and other inventory costs as expenses in the year incurred for financial reporting but must include these in Inventory for tax reporting. Why are deferred taxes related to inventory disclosed as a deferred tax asset? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2012 and 2014. f. Firms must recognize expenses related to postretirement health care and pension obligations as employees provide services, but claim an income tax deduction only when they make cash payments under the benefit plan. Why are deferred taxes related to health care obligation disclosed as a deferred tax asset? Why are deferred taxes related to pensions disclosed as a deferred tax liability? Suggest reasons for the direction of the change in amounts for these deferred tax items between 2012 and 2014. g. Firms must recognize expenses related to uncollectible accounts when they recognize sales revenues, but claim an income tax deduction when they deem a particular customer’s accounts uncollectible. Why are deferred taxes related to this item disclosed as a deferred tax asset? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2012 and 2014. h. ABC uses the straight-line depreciation method for financial reporting and accelerated depredation methods for income tax purposes. Why are deferred taxes related to depreciation disclosed as a deferred tax liability? Suggest reasons for the direction of the change in amounts for this deferred tax liability between 2012 and 2014.

Interpreting Income Tax Disclosures. The financial statements of Nike, Inc., reveal the information regarding income taxes shown in Exhibit 2.17. REQUIRED a. Assuming that Nike had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for 2007? Explain. b. Did book income before taxes for financial reporting exceed or fall short of taxable income for 2008? Explain. c. Will the adjustment to net income for deferred taxes to compute cash flow from operations in the statement of cash flows result in an addition or a subtraction for 2008? d. Nike recognizes provisions for sales returns and doubtful accounts each year in computing income for financial reporting. Nike cannot claim an income tax deduction for these returns and doubtful accounts until customers return goods or accounts receivable become uncollectible. Why do the deferred taxes for returns and doubtful accounts appear as deferred tax assets instead of deferred tax liabilities? Suggest possible reasons why the deferred tax asset for sales returns and doubtful accounts increased between 2007 and 2008. e. Nike recognizes an expense related to deferred compensation as employees render services but cannot claim an income tax deduction until it pays cash to a retirement fund. Why do the deferred taxes for deferred compensation appear as a deferred tax asset? Suggest possible reasons why the deferred tax asset increased between 2007 and 2008. f. Nike states that it recognizes a valuation allowance on deferred tax assets related to foreign loss carryforwards because the benefits of some of these losses will expire before the firm realizes the benefits. Why might the valuation allowance have decreased slightly between 2007 and 2008? g. Nike reports a large deferred tax liability for Intangibles. In another footnote, Nike states, During the fourth quarter ended May 31, 2008 the Company completed the acquisition of Umbro Plc (Umbro). As a result, 378.4 million was allocated to unamortized trademarks, 319.2 million was allocated to goodwill and 41.1 million was allocated to other amortized intangible assets consisting of Umbros sourcing network, established customer relationships and the United Soccer League Franchise. Why would Nike report a deferred tax liability associated with this increase in intangible assets on the balance sheet? h. Nike recognizes its share of the earnings of foreign subsidiaries each year for financial reporting but recognizes income from these investments for income tax reporting only when it receives a dividend. Why do the deferred taxes related to these investments appear as a deferred tax liability? i. Why does Nike recognize both deferred tax assets and deferred tax liabilities related to investments in foreign operations?

Analyzing Coca-Colas Income Tax Disclosures Obtain The Coca-Cola Companys 2017 annual report either using the Investor Relations portion of its website (do a web search for Coca-Cola investor relations) or go to http://www.sec.gov and click Search for company filings under filings and Forms (EDGAR). Required: 1. What was the total income tax expense related to income from continuing operations before income taxes for 2017? How much of this was current? How much was deferred? 2. What were the total gross deferred tax assets at the end of 2017? Total deferred tax liabilities? Net deferred tax liability? 3. How much was the noncurrent deferred tax liability at the end of 2017, and where was it reported? 4. How much were the operating loss carryforwards at the end of 2017? Over what time periods must these be utilized?

XYZ Company reported the following pretax income (loss) and related tax rates during the years 2016-2021. Year Pretax Income (loss) Таx rate 2016 $75,000 30% 2017 150,000 30% 2018 240,000 40% 2019 (540,000) 48% 2020 210,000 40% 2021 300,000 42% a. Prepare the journal entries for the years 2019 and 2020 to record income taxes and the tax effects of the loss. Assume that XYZ elects the carryback provision where possible and it is probable that it will realize benefits of any loss carryforward. b. Prepare the portion of the income statement that presents your answer in part (a) for the year ended 2019.

A company reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Year Pretax Income (Loss) Tax Rate 2018 $183,000 17% 2019 69,000 17 2020 (206,800) 23 2021 385,100 23 Assuming that the company uses the carryforward provision, what is the amount of income or loss that will be reported for 2020? (Enter the amount only. DO NOT put a plus or minus sign in front of the amount.)

Draft the income tax expense portion of the income statement for 2024. Begin with the line "Income before income taxes." Assume no permanent differences exist. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Current WILDHORSE INC.'s Income Statement (Partial) For the Year Ended December 31, 2024 +A +A 1665000 i +A $

Where in its December 31, 2015, balance sheet does AF report deferred taxes? Howdoes this approach differ from the way deferred taxes are reported using U.S. GAAP?Using the Internet, determine how deferred taxes would be reported using IFRS atthe time of your research. Explain why that approach might differ from the way AFreported deferred taxes at December 31, 2015.

A company reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Year Pretax Income (Loss) Tax Rate 2018 $142,000 17% 2019 94,000 17 2020 (208,800) 22 2021 318,500 22 In 2021, what amount of income tax payable should be reported for the company, assuming the loss can carry forward?

1. The amount of income taxes that relate to financial income subject to tax is reported on the income statement as A. long-term deferred income taxes (credit) C. income tax expense B. current deferred income taxes (debit) D. income tax payable 2. An item that would create a permanent difference in pretax financial and taxable income would be A. using accelerated depreciation for tax purposes & straight line depreciation for book purposes. B. using the percentage of completion method on long-term construction contracts. C. purchasing equipment previously leased with an operating lease in prior years. D. paying fines for violation of laws. 3. Which of the following is the most likely item to result in a deferred tax asset? A. using completed contract method of recognizing construction revenue tax purposes, but using percentage of completion method for financial reporting purposes. B. using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes.…

Adjustments for Deferred Tax Asset Valuation Allowance Consider the following income tax footnote information for Oracle for the fiscal year ended May 31, 2019 (fiscal year 2019). The following is a geographical breakdown of income before the provision for income taxes: Year Ended May 31 (in millions) Domestic 2019 2018 2017 $3,774 $3,366 $3,674 Foreign 8,494 9,058 8,006 Income before provision for income taxes $12,268 $12,424 $11,680 The provision for income taxes consisted of the following: Year Ended May 31 ($ in millions) Current provision: Federal State 2019 2018 2017 $979 $8,320 $936 257 300 264 1,097 1,100 1,475 Foreign Total current provision $2,376 $9,684 $2,668 Deferred benefit: Federal State Foreign Total deferred benefit Total provision for income taxes $483 $(827) $(158) (28) (26) (29) (1,646) 6 (253) $(1,191) $(847) $(440) $1,185 $8,837 $2,228 The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before…

(NOL Carryback and Carryforward, Valuation Account Needed) Beilman Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2015 $120,000 40% 2016 90,000 40 2017 (280,000) 45 2018 120,000 45 The tax rates listed were all enacted by the beginning of 2015. Instructions(a) Prepare the journal entries for years 2015–2018 to record income tax expense (benefit) and income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carryforward will not be realized.(b) Prepare the income tax section of the 2017 income statement beginning with the line “Operating loss before income taxes.”(c) Prepare the income tax section of the 2018 income statement beginning with the line “Income…

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What is the amount of taxes the company paid in 2008?

Solution Summary: The author identifies the reasons behind change in amounts of deferred tax assets related to self-insurance between the years 2012 and 2014 for Company AC.

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