Black Company, organized on January 2, 20X1, had pre-tax accounting income of $500,000 and taxable income of$800,000 for the year ended December 31, 20X1. The only temporary difference is accrued product warranty costs,which are expected to be paid as follows:20X220X320X420X5$100,00050,00050,000100,000Circumstances indicate that it is highly likely that Black will have taxable income in the future. It had no temporarydifferences in prior years. The enacted income tax rate is 21%.Required:1. In Black's December 31, 20X1, balance sheet, how much should the deferred tax asset be?2. Suppose that as of December 31, 20X1, a newly enacted law called for the tax rate to change to 25%, effectiveJanuary 1, 20X3. Then what would be the amount of the deferred tax asset at December 31, 20X1?

Deferred Tax Asset/Liability arises as a result of temporary timing differences between taxable…

Answered: Black Company, organized on January 2,…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter14: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4BCRQ

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Black Co., organized on January 2, 2004, had pretax financial statement income of P500,000 and taxable income of P800,000 for the year ended December 31, 2004. The only temporary differences are accrued product warranty costs, which Black expects to pay as follows: P 100,000 P 50,000 P 50,000 P 100,000 2005 2006 2007 2008 The enacted income tax rates are 25% for 2004, 30% for 2005 through 2007, and 35% for 2008. Black believes that future years' operations will produce profits. 20) In its December 31, 2004 balance sheet, what amount should Black report as deferred tax asset? a. P50,000 b. P75,000 C. P90,000 d. 95,000
9. Black Co., organized on January 2, 20x0, had pretax financial statement income of P500,000 and taxable income of P800,000 for the year ended December 31, 20x0. The only temporary differences are accrued product warranty costs, which Black expects to pay as follows: 20x1 P100,000 20x2 50,000 20x3 50,000 20x4 100,000 The enacted income tax rates are 25% for 20x0, 300% for 20x1 through 20x3, and 35% for 20x4 Black believes that future years' operations will produce profits. In its December 31, 20x0, balance sheet, what amount should Black report as deferred tax asset? c. 90,000 d. 95,000 h a. 50,000 b. 75,000 7:34 pm AD ENG /1/2021 27°C
A company reports pretax accounting income of $10 million, but because of a single temporary difference, taxable income is $12 million. No temporary differences existed at the beginning of the year, and the tax rate is 40%. prepare the appropriate journal entry to record income taxes.
Dan plc is preparing its financial statements for the year ended 31 December 20X7. Its initial trial balances show the following balance: Income tax payable on 1 January 20X7 Income tax paid M 337,850 £ 351,083 The income tax paid during the year ended 31 December 20X7 completely settles the 20X6 liability. The total estimated tax due on the profits for the year ended 31 December 20X7 is 402,917 Dan plc should record the following journal at 31 December 20X7 A. Debit Income tax expense £389,684; Credit Income tax payable £51,834, Credit Income tax paid £337,050 B. Debit Income tax expense £389,684, Credit Income tax payable £65,067, Credit Income tax paid £324,617 C. Debit Income tax expense £402,917, Credit Income tax payable £65,067, Credit Income tax paid £337,850 D. Debit Income tax expense £402,917, Credit Income tax payable £51,834; Credit Income tax paid £351,083
39. Wright Co., organized on January 2, 2021, had pretax accounting income of $960,000 and taxable income of $3,120,000 for the year ended December 31, 2021. The only temporary difference is accrued product warranty costs which are expected to be paid as follows: 2022 $720,000 2023 360,000 2024 360,000 2025 720,000 The enacted income tax rates are 25% for 2021, 20% for 2022 through 2024, and 15% for 2025. If Wright expects taxable income in future years, the deferred tax asset in Wright's December 31, 2021 balance sheet should be a. $288,000. b. $360,000. c. $396,000. d. $540,000.
Fanta Ltd has paid the following PAYG tax installments for the year ended 30 June: September quarter $11,000 December quarter $11,000 March quarter $11,000 June quarter $11,000 Total $44,000 Taxable income for the year ended 30 June, was $168,000. Company tax rate is 30%. Required: Prepare general journal entries to record the company’s income tax instalments and final payment.
11. Ace Company had a pretax accounting income of P5,000,000 for its first year of operations. The following differences are noted between accounting income and taxable income: 1) Nondeductible expenses - 200,000; 2) Nontaxable revenue - 500,000; 3) Gross income on installment sales reported in accounting income but not in taxable income - 1,000,000; 4) Provision for doubtful accounts - 100,000; and 5) Income tax rate - 30%. COMPUTE THE FOLLOWING: 1. Accounting income subject to tax; 2) Taxable income; 3) Total income tax expense; and 4) Current tax expense.
year before bonus and tax is P5,250,000. The income tax rate a bonus of 5% of the entity's earnings. The income for the Nature Company has an agreement to pay the sales manager Problem 1-29 (ACP) Nature Company has an agreement to pay the sales mana a bonus of 5% of the entity's earnings. The income for year before bonus and tax is P5,250,000. The income tax p is 30% of income after bonus. Required: Determine the bonus under each of the followin independent assumptions: 1 Bonus is a certain percent of the income before bonn and before tax. * f income after bonus h before tax. 3. Bonus is a certain percent of income after bonus and after 2. Bonus 1s a certain percent o tax. 4. Bonus is certain percent elincome.after tax but before bonus
The reported pretax financial income of Mechado Company is P1,800,000 and current income tax rate is 30%. Assume the following differences between the financial income and taxable income for the year: 1. Fines paid for late payment of taxes, P15,5002. Premiums paid on life insurance policy on officers, P200,000. Beneficiary named in the policies is Mechado Company.3. Impairment loss recognized on goodwill, P90,0004. Excess of tax depreciation over book depreciation, P30,0005. Excess of warranty expense over actual expenditures, P27,0006. Excess of estimated uncollectible accounts for financial reporting over the accounts actually written off for tax reporting, P12,000.7. Rent collected in advance of period earned, P35,000. Taxable income is?
In Year 1, a company has revenues of $600,000 and expenses of $400,000. Of theexpenses, $70,000 represents a warranty on a company product. However, the companyonly paid $30,000 as a result of this warranty. The remainder is expected to be paid in afuture year in which company officials believe there is a 60% chance that the companywill have taxable income to be reduced by this warranty cost. The relevant tax rate is30% for Year 1 and 32% for periods after that. What is the total amount of income tax expense to be recognized in Year 1?
This year AB Company has each of the following items in its income statement. Part A. Gross profit on instalment sales Revenues on long term construction contracts Estimated costs of product warranty contracts Premiums on officers’ life insurance policies as AB Company as beneficiary. Instructions: (a) Under what conditions would deferred income taxes need to be reported in the financial statements? (b) Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition. Part B. AB Company’s president has heard that deferred income taxes can be classified in different ways in the balance sheet. Instructions: Identify the conditions under which deferred taxes would be classified as noncurrent item in the balance sheet. What justification exists for such classification?
Martin Ltd, in the first year of its operations, reported the following information regarding its operations: a. Earnings before tax for the year was $2,500,700 and the tax rate was 38% b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700. c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is the amount deductible. d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes. In the second year of its operations, Martin Ltd. reported the following information: a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%. b. Depreciation was $240.700, and the CCA was $740,700. Net book value at year-end was $1,440.700,…

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