Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 12, Problem 1.5E
To determine
Taxable income:
Taxable income is basically defined as the base amount on which the tax is imposed by the income tax system. It includes all the income and subtracting the expenses from it.
To explain: The reason for effective tax rate in second quarter was greater than that of first quarter and previous two years but lower than 30%.
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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.
Identify the deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded.
Which general principle applies to the reporting of income tax expenses under interim income statement accounting principles
A Reporting should not be done unless there are unusual events that occur in the period and are expect to affect the fiscal year tax liability.
B Reporting should be based on a prorate share of the previous fiscal year’s taxes
C Reporting should be based on an estimate of the effective annual tax rate and tax liability for the full fiscal year.
D Reporting should be based on the last year’s effective tax rates and tax liability for the full fiscal year.
Collect the latest annual report of an ASX listed 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. Please remember some aspects of your firm’s treatment of its tax – can be a very complicated area, particularly for some firms. Based on your understanding of the topic “accounting for income tax” and based on your reading of the collected annual reports, do the following tasks.
Briefly explain the concepts of temporary difference and permanent difference. Identify any permanent differences that your company may have.
What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firm’s financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firm’s tax expense in its accounts?
Briefly explain the…
Chapter 12 Solutions
Advanced Accounting
Ch. 12 - Prob. 1UTICh. 12 - Prob. 2UTICh. 12 - Prob. 3UTICh. 12 - Prob. 4UTICh. 12 - Prob. 1.1ECh. 12 - Prob. 1.2ECh. 12 - Prob. 1.3ECh. 12 - Prob. 1.4ECh. 12 - Prob. 1.5ECh. 12 - Prob. 1.6E
Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4.1ECh. 12 - Prob. 4.2ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Ratable allocation for nonordinary items. Baxter...Ch. 12 - Prob. 9.1ECh. 12 - Prob. 9.2ECh. 12 - Prob. 9.3ECh. 12 - Prob. 10ECh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7.1PCh. 12 - Prob. 12.7.2PCh. 12 - Prob. 12.7.3PCh. 12 - Prob. 12.8.1PCh. 12 - Prob. 12.8.2P
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- Which of the following statements is not correct? Multiple Choice Corporations must estimate and prepay their income taxes through quarterly tax deposits. At the end of the year, when the worksheet is prepared, the Income Tax Expense account is adjusted only if the corporation owes additional taxes. Income Tax Expense may be shown as an operating expense on a corporation's income statement. The Income Tax Expense account may be either debited or credited in the adjusting journal entry for income tax at year-end.arrow_forwardIncome from continuing operations and retained earnings The accountant preparing the income statement for SMC had some doubts about the appropriate accounting treatment of the six items listed below during the fiscal year ending December 31, 2023. Some of the six items have already been recorded in income from continuing operations while others have not yet been recorded. If needed, assume a tax rate of 40 percent. Required: for each of the six items, decided whether A) the item needs to be adjusted in Income from Continuing Operations, B) the item needs to be reported below Income from Continuing Operations, or C) reported on the Statement of Retained Earnings. 1. Office equipment purchased January 1, 2023, for $60,000 was incorrectly charged to Supplies Expense at the time of purchase. The office equipment has an estimated three-year service life with no expected salvage value. SMC uses the straight-line method to depreciate office equipment for financial reporting purposes. This…arrow_forwardThe amount of income taxes due to the government for a period of time is rarely the amount reported on the income statement for that period as income tax expense. Instructions a. Explain the objectives of accounting for income taxes in general-purpose financial statements. b. Explain the basic principles that are applied in accounting for income taxes at the date of the financial statements to meet the objectives discussed in (a). c. List the steps in the annual computation of deferred tax liabilities and assets.arrow_forward
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