Alpesh Exercise 16-4 (Algo) Taxable Income given; calculate deferred tax liability from book-tax difference;financial statement effects [LO16-2]Ayres Services acquired an asset for $120 million in 2024. The asset is depreciated for financial reportingpurposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost isdepreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting Income, depreciation,and taxable Income in 2024, 2025, 2026, and 2027 are as follows:Pretax accounting incomeDepreciation on the incomestatementDepreciation on the tax returnTaxable incomeRequired:($ in millions)2024 2025 2026$ 355 $ 375 $ 3903030(54)(34)2027$ 4253030(20)(12)$ 331 $ 371 $ 400 $ 443For December 31 of each year, determine (a) the cumulative temporary book-tax difference for thedepreciable asset and (b) the balance to be reported in the deferred tax liability account.Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers In milllons rounded to 2decimal places (l.e., 5,500,000 should be entered as 5.50).Cumulative Temporary DifferenceDeferred Tax LiabilityBeginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027

Deferred tax liability : Deferred tax liability refers to the liability to pay taxes in the future.…

Exercise 16-4 (Algo) Taxable Income given; calculate deferred tax liability from book-tax difference; financial statement effects [LO16-2] Ayres Services acquired an asset for $120 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting Income, depreciation, and taxable Income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income Depreciation on the income statement $ 355 $375 $390 $ 425 30 30 30 Depreciation on the tax return. (54) Taxable income Required: 30 (34) (20) (12) $ 331 $ 371 $ 400 $ 443 For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027 Cumulative Temporary Difference Deferred Tax Liability

Exercise 16-4 (Algo) Taxable Income given; calculate deferred tax liability from book-tax difference; financial statement effects [LO16-2] Ayres Services acquired an asset for $120 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting Income, depreciation, and taxable Income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income Depreciation on the income statement $ 355 $375 $390 $ 425 30 30 30 Depreciation on the tax return. (54) Taxable income Required: 30 (34) (20) (12) $ 331 $ 371 $ 400 $ 443 For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027 Cumulative Temporary Difference Deferred Tax Liability

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...

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Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively 3. Temporary difference that results in taxable amounts in future years when the related asset or liability is recovered or settled, respectively 4. The future effects on income taxes, as measured by the applicable enacted tax rate and provisions of the enacted tax low, resulting from temporary differences and operating loss carryforwards at the end of the current year 5. The change during the year in a corporations deferred tax liabilities and assets 6. The deferred tax consequences of future taxable amounts 7. The portion of o deferred tax asset for which it is more likely than not that a tax benefit will not be realized 8. Temporary difference that results in deductible amounts in future years when the related asset or liability is recovered or settled, respectively 9. The sum of income tax payable and deferred tax expense (or benefit) 10. The amount of income taxes paid or payable (or refundable) for the current year 11. An excess of tax deductible expenses over taxable revenues in a year that may be carried forward to reduce taxable income in a future year 12. The excess of taxable revenues over tax deductible expenses and exemptions for the year 13. Income tax expense divided by income before income taxes
E 16-5 Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation in the year of purchase; financial statement effects LO16-2 [This exercise is a variation of E 16-4, modified to have the asset fully depreciated in the year of purchase.] Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight- line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income $330 $350 $365 $400 Depreciation on the income statement 20 20 20 20 Depreciation on the tax return (80) (0) (0) (0) Taxable income $270 $370 $385 $420 Required: For December 31 of each year, determine (a) the temporary book-tax difference for the depreciable…
Problem 16-7 (Algo) Multiple differences; calculate taxable income; balance sheet classification [LO16-2, 16-3, 16-5, 16-8] Sherrod, Inc., reported pretax accounting income of $92 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $6 million. The installment receivable account at year-end 2021 had a balance of $8 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $3 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $104 million. Depreciation is reported by the straight-line method, assuming a four-year…
Problem 16-9 (Algo) Determine deferred tax assets and liabilities from book-tax differences; financial statement effects [LO16-2, 16-3] Corning-Howell reported taxable income in 2024 of $200 million. At December 31, 2024, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below: Assets Current Net accounts receivable Prepaid insurance Prepaid advertising Noncurrent Investments in equity securities (fair value) * Buildings and equipment (net) Liabilities Current Deferred subscription revenue Long-term Liability-compensated future absences Gains and losses taxable when investments are sold. Carrying Amount Tax Basis $ 88 million $ 92 million 100 million 0 84 million 84 million 0 440 million 360 million 92 million 0 674 million 0 The total deferred tax asset and deferred tax liability amounts at January 1, 2024, were $196.25 million and $25 million, respectively. The enacted tax rate is 25% each year. Required: 1.…
Exercise 16-5 (Algo) Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation in the year of purchase; financial statement effects [LO16-2] Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 2027 Pretax accounting income $ 370 $ 390 Depreciation on the income statement 20 20 $ 405 20 Depreciation on the tax return (80) (0) (0) $ 440 20 (8) $ 310 $ 410 $ 425 $ 460 Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tex difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account.…
independent problems: 1. ABC Company reported in its 2019 current tax expense at P 5,530,000. The following changes in ABC asset's and liabilities are as follows: Deferred tax asset 12/31/2019-200,000 12/31/2018-500,000 Deferred tax liability 12/31/2019-420,000 12/31/2018-600,000 Income tax payable 12/31/2019-850,000 12/31/2018-200,000 The deferred tax liability was caused by accelerated depreciation and the deferred tax asset is for rentals received in advance. How much is ABC's total income tax expense? 2. ABC Inc. began operations on July 1,2019. The company recognizes income from long term construction contracts under the percentage of completion method in its financial statements and under the cost recovery method for income tax purposes. Income under each are as follows: 2019 Cost recovery- P 0 % of completion- P 700,000 2020 Cost recovery- P 800,000 % of completion- P 1,280,000 2021 Cost recovery- P 1,350,000 % of completion- P 1,700,000 The income tax rate was 32% for…
I need help with required 2 please. Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8] [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions…
Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8] Skip to question [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and…
Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8] Skip to question [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and…
1. Prior to 2022, taxable income and accounting income were identical. 2. Accounting income was $1.7 million in 2022 and $1.46 million in 2023. 3. On January 1, 2022, equipment costing $1.97 million was purchased. It is being depreciated on a straight-line basis over eight years for financial reporting purposes, and is a Class 8-20% asset for tax purposes. Tax-exempt interest income of $70,000 was received in 2023. 4. 5. The tax rate is 30% for all periods. 6. Taxable income is expected in all future years. 7. Sunland had 100,000 common shares outstanding throughout 2023. (a) ง Calculate the amount of capital cost allowance and depreciation expense for 2022 and 2023, and the corresponding carrying amount and undepreciated capital cost of the depreciable assets at the end of 2022 and 2023. Capital Cost Allowance Undepreciated Capital Cost Depreciation Expense Net Book Value
identify deferred tax assets/liabilioties in the following figure Total Current Assets - - - - Total Assets 1057734 1014060 979868 976502 Cash & Due from Banks 96610 81786 73246 65619 Other Earning Assets, Total 144765 123145 118007 118805 Net Loans 759118 742473 737033 727002 Property/Plant/Equipment, Total - Net 5468 5602 5205 2383 Property/Plant/Equipment, Total - Gross - - - - Accumulated Depreciation, Total - - - - Goodwill, Net 5269 5284 5997 5974 Intangibles, Net 1674 1660 1732 1991 Long Term Investments 2865 3034 3054 3001 Other Long Term Assets, Total 4139 3830 3098 18226 Other Assets, Total 37826 47246 32496 33501 Total Current Liabilities - - - - Total Liabilities 982736 942052 908766 906908 Accounts Payable 9826 13188 9998 10285 Payable/Accrued - - - - Accrued Expenses - - - - Total Deposits 750843 701551 666300 640311 Other Bearing Liabilities, Total - - - 32 Total Short Term Borrowings 26633 16877 20346 19099…
Problem 16-7 (Static) Multiple differences; calculate taxable income; balance sheet classification; financial statement effects [LO16-2, 16-3, 16-5, 16-8] Sherrod, Incorporated, reported pretax accounting income of $76 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2024 had a balance of $7 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $80 million. Depreciation is reported by the…