Concept explainers
Intel-period Tax Allocation
Chris Green, CPA, is auditing Rayne Co.’s 2019 financial statements. For the year ended December 31, 2019, Rayne is applying GAAP for income taxes. Rayne’s controller, Dunn, has prepared a schedule of all differences between financial statement and income tax return income. Dunn believes that as a result of pending legislation, the enacted tax rate at December 31, 2019, will be increased for 2020. Dunn is uncertain which differences to include and which rates to apply in computing
Required:
Prepare a brief memo to Dunn from Green that identifies the objectives of accounting for income taxes, defines temporary differences, explains how to measure
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Chapter 18 Solutions
Intermediate Accounting: Reporting And Analysis
- Balance Sheet Presentation Thiel Company reports the following deferred tax items at the end of 2019: Required: Show how the preceding deferred tax items are reported on Thiels December 31, 2019, balance sheet.arrow_forwarda. Prepare a schedule showing the reversal of the temporary differences and the computation of income taxes payable and deferred tax asset or liability as of December 31, 2020.b. Prepare journal entries to record income taxes payable and deferred income taxes.c. Prepare the section of the statement of comprehensive income of Wall Services beginning with "Income from continuing operations before income taxes" for the year ended December 31, 2020.arrow_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_forward
- Bridgeport Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes: Year 2018 2019 2020 2021 (a) Accounting Income 2019 (Loss) $131.000 2020 2021 97,000 (306,000) 223.000 The tax rates listed were all enacted by the beginning of 2018. Bridgeport reports under the ASPE future/deferred income taxes method. 2018 Deferred Tax Expense Tax Rate 25 % Prepare the journal entries for each of the years 2018 to 2021 to record income tax. Assume the tax loss is first carried back, and that at the end of 2020, the loss carryforward benefits are judged more likely than not to be realized in the future. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts) de 25 % 30 % 30 % Prepare the journal entries for each of the years 2018 to 2021 to record income tax Assume the tax loss is first carried back, and that at…arrow_forwardExercise 19-23 (Part Level Submission) Spamela Hamderson Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Year 2018 2019 2020 2021 Pretax Income (Loss) Tax Rate $120,000 90,000 17% 17% 19% 19% (200,000) 300,000 The tax rates listed were all enacted by the beginning of 2018. (a) Your answer is partially correct. Try again. Prepare the journal entries for the years 2018-2021 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryforward, assuming that at the end of 2020 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation 2018 Income Tax Expense Debit 20,400 ☑ Income Tax Payable 2019 Income Tax Expense…arrow_forwardReconciling between Effective and Statutory Tax Rates Baltimore Inc. reported pretax GAAP income of $72,000 in 2020. In analyzing differences between GAAP income and taxable income, the company determined that it had deducted $9,000 in nondeductible fines and added $5,040 in tax-exempt municipal interest revenue to GAAP income. The statutory tax rate is 25%. Prepare a reconciliation between Baltimore Inc.'s effective and statutory tax rates. • Note: Round percentage to one decimal place (for example, enter 3.4 for 3.35%). Percentage Statutory tax rate 0 % Tax-exempt income 0 % Non-deductible expense 0 % Effective taxX rate 0 %arrow_forward
- Analyzing Tax ExpenseThe following is an excerpt from Walmart’s Form 10‑K for the fiscal year ended January 31, 2019.A summary of the provision for income taxes is as follows ($ millions): Current: U.S. federal $2,763 U.S. state and local 493 International 1,495 Total current tax provision $4,751 Deferred: U.S. federal $(361) U.S. state and local (16) International (93) Total deferred tax expense (benefit) $(470) Consider the deferred portion of Walmart’s tax provision. Which of the following is plausible?Hint: Consider the tax expense equation.a. Walmart’s deferred tax assets increased during the year.b. Walmart’s deferred tax liabilities decreased during the year.c. Both a and b are plausible.d. Neither a nor b is plausible.arrow_forwardDiscord Inc. income tax return shows taxes currently payable for 2020 of $85,000. The company reported deferred tax assets of $35,000 at the end of 2019 and $24,000 at the end of 2020. Accord reported deferred tax liabilities of $48,000 at the end of 2019 and $54,000 at the end of 2020. Determine the amount of income tax expense reported by Discord for 2020.arrow_forwardCSX Corporation reported the following in its tax footnote to its 2019 financial statements. Use this information to answer the requirements. $ millions Net income Interest expense, net 737 639 546 Average total assets 37,493 36,234 35,577 Compute (a) return on assets and (b) the adjusted return on assets for each of the three years. Assume a statutory tax rate of 37% for 2017 and 22% for 2018 and 2019. a. Compute return on assets (ROA) for 2017, 2018, and 2019 Note: 1. Select the appropriate numerator and denominator used to compute ROA from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute ROA for each year. Year Numerator Net income 2019 2018 2017 $3,331 $3,309 $5,471 2017 $ 2018 $ 2019 $ 2017 $ 2018 S 2019 $ Denominator + Average total assets ÷ 35,577 5,471 $ 3,309 $ 3,331 $ ÷ b. Compute adjusted return on assets (ROA) for 2017, 2018, and 2019 Note: 1. Select the appropriate numerator and denominator used to compute adjusted ROA from the…arrow_forward
- Extracts from trial balance at 31 March, 2019 Current tax credit balance 1,600,000 Deferred tax liability 5,200,000 The balance on current tax represents the under/over provision of the tax liability for the year ended 31 March, 2018. The required provision for income tax for the year ended 31 March 2019 is GHe38-8 million. The difference between the carrying amounts of the net assets of the company and their (lower) tax base at 31 March, 2019 is GHe 54 million. The rate of income tax is 25%. Required: Prepare a Statement of Profit or Loss Extract and Statement of Financial Position Extract for 31 March, 2019.arrow_forwardA corporation filed its Annual Income Tax Return for the taxable year 2018 on April 15, 2019 together with its required attachments such as the Audited Annual Financial Statements. On March 17, 2020, the company’s accountant discovered an error for excluding a sales amounting to Php7.5M which comprises a 30% under declaration of sales. What necessary action must be done by the company in relation to its discovery?arrow_forwardRequired: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. Assume Fore will carry back its NOL to prior years. 2. What is the net operating loss reported in 2021 income statement? 3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $288 million. No additional temporary differences originate in 2022.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning