Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 1BIC
To determine
Identify the adjustment to net income for
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Collect the latest annual report of ASX company for the last 2 financial years. Please read the financial statements (balance sheet, income statement, cash flow statement) and notes attached to financial statements on income tax issues very carefully.
Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not, why is the difference?
A
Comparison of Firm Performance
1
2 2013 Financials
3
Net operating revenues
4 Cost of goods sold
5 Gross profit
6 Selling, general, and administrative expense
7 Other costs
8 Operating income
9
Interest expense
10 Other income (loss) - net
11 Income before income taxes
12 Income taxes
13 Net income
14 Assets
15 Cash and cash equivalents
16 Net receivables
17 Inventories
18 Prepaid expenses and other
19 Total current assets
20 Property, plant and equipment
21 Goodwill
22 Other assets
23 Total assets
24 Liabilities and Stockholder Equity
25 Accounts payable
26 Short-term debt
27 Total current liability
28 Long-term debt
29 Other liabilities
30 Total liabilities
31 Stockholder equity
32
B
Walmart
469,162
352,488
116,674
88,873
27,801
2,251
187
25,737
7,981
17,756
7,781
6,768
43,803
1,588
59,940
116,681
20,497
5,987
203,105
59,099
12,719
71,818
41,417
113,235
89,870
C
Macy's
27,931
16,725
11,206
8,440
88
2,678
388
(134)
2,156
767
1,389
1,836
371
5,308
361
7,876
8,196
3,743
1,176
20,991…
Using the information provided for Global, prepare the company's journal entry to record income taxes for 2012 and 2011. Round your answers to two decimal places. If an amount box does not require an entry, leave it blank.
Using the information provided for Global, determine the company's effective tax rate for 2012 and 2011. Round your answers to two decimal places.
2012
2011
Effective tax rate
%
%
Chapter 2 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 2 - Prob. 1QECh. 2 - Asset Valuation and Income Recognition. Asset...Ch. 2 - Trade-Offs among Acceptable Accounting...Ch. 2 - Income Flows versus Cash Flows. The text states,...Ch. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Computation of Income Tax Expense. A firms income...Ch. 2 - Computation of Income Tax Expense. A firms income...
Ch. 2 - Costs to Be Included in Historical Cost Valuation....Ch. 2 - Effect of Valuation Method for Nonmonetary Asset...Ch. 2 - Prob. 13PCCh. 2 - Prob. 14PCCh. 2 - Prob. 15PCCh. 2 - Deferred Tax Assets. Components of the deferred...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Interpreting Income Tax Disclosures. Prepaid Legal...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Analyzing Transactions. Using the analytical...Ch. 2 - Prob. 21PCCh. 2 - Starbucks The financial statements of Starbucks...Ch. 2 - Prob. 1BICCh. 2 - Prob. 1CICCh. 2 - Prob. 1DICCh. 2 - Prob. 1EICCh. 2 - Prob. 1FICCh. 2 - Starbucks The financial statements of Starbucks...
Knowledge Booster
Similar questions
- 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?arrow_forwardAnalyzing 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?arrow_forwardInterpreting 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 customers 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.arrow_forward
- Give answer with explanationarrow_forward1. Prepare journal entries to record the income tax and 2. Present the income tax expense in the income statement Problem 16-3 (ACP) In 2021, Argentina Company received an advance payment of P1,000,000, which was subject to tax but not reported in accounting income until 2022. The income statement and tax return showed the following: 2021 2022 Income before tax per income statement Income before tax per tax return Income tax rate 6,000,000 7,000,000 9,000,000 8,000,000 25% 25% Required: 1. Prepare journal entries to record the income tax a deferred tax for 2021 and 2022. for 2021 and 2022.arrow_forwardUse the following information for Ingersoll, Incorporated. Assume the tax rate is 21 percent. Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends Cash Accounts receivable Inventory Net fixed assets Current assets Prepare a balance sheet for this company for 2020 and 2021. (Do not round intermediate calculations.) Total assets Assets Current liabilities Liabilities & Equity 2020 2021 $7,616 $8,174 1,094 1,094 2,621 2,975 621 519 510 587 5,058 5,955 725 13,083 15,601 33,490 35,144 4,195 4,068 9,400 9,660 929 1,022 INGERSOLL, INCORPORATED Balance Sheet as of December 31 2020 Total liabilities & owners' equity 3,994 4,387 772 $ 3,994 $ 4,387 9,400 2021 5,058 5,955 9,660arrow_forward
- Vishanoarrow_forwardPart 1: During 2020 Big Time Consulting collected a $30,000 revenue in advance. It is unearned for GAAP, but included in income for tax. Accounting income before-tax was $250,000. The deferred income tax account has no balance. The $30,000 will be included in the 2021 financial statements. Using a 21% tax rate, give the journal entry to accrue income taxed for 2020. Part 2: For 2021 the accounting income before tax is $300,000 and there are no new book tax differences. Using a 21% tax rate, give the journal entry to accrue income taxed for 2021arrow_forwardILLUSTRATION 1. Compute the tax payable by a company for the Assessment year 2012-13 if (a) its total income is $ 4,00,000 and book profit is $ 15,00,000 ; or (b) its total income is $ 6,20,000 and book profit is $ 10,00,000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning