Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2023-2026 are as follows: Service Revenue Collections 2023 2024 2025 $ 732,000 $ 692,000 822,000 850,000 782,000 2026 788,000 774,000 792,000 Pretax Accounting Income $ 258,000 332,000 300,000 272,000 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%. (Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2023- 2026.) Required: 1. to 3. Prepare the appropriate journal entries to record Alsup's 2024 income taxes, 2025 income taxes, and 2026 income taxes.

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2023-2026 are as follows: Service Revenue Collections 2023 2024 2025 $ 732,000 $ 692,000 822,000 850,000 782,000 2026 788,000 774,000 792,000 Pretax Accounting Income $ 258,000 332,000 300,000 272,000 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%. (Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2023- 2026.) Required: 1. to 3. Prepare the appropriate journal entries to record Alsup's 2024 income taxes, 2025 income taxes, and 2026 income taxes.

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 4E: Single Temporary Difference: Multiple Rates At the end of 2019, Fulhage Company reported taxable...

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Temporary and Permanent Differences Lin has just completed its first year of operations and has a number of differences between its pretax financial income and taxable income. The differences at the end of 2019 are as follows: a. Lin recorded 7,000 of interest revenue on municipal bonds during 2019. b. 15,000 of accrual-basis sales were recognized in income during 2019. They are expected to be received in cash during January 2020. c. Depreciation on machinery totaled 28,000 using straight-line depreciation for financial statements. Lins tax accountant recorded 36,000 of depreciation on the companys tax return. d. Lin was fined 3,000 for violating certain labor laws during 2019. Lin paid the fine during 2019 and agreed to ensure future violations would not occur. e. Bryant Corporation has agreed to rent space from Lin in 2020. In December 2019, Lin received 7,500 from Bryant in advance for rent. f. For 2019, Lin reported 9,500 of warranty expense on its income statement. The companys warranty liability at the end of 2019 was 6,250. Lin expects additional warranty costs to be paid during 2020. Required: 1. For each item, determine if it results in a temporary or permanent difference. If the item results in a temporary difference, determine if it results in a deferred tax asset or deferred tax liability. 2. For each item, determine if it initially results in pretax financial income being greater than or less than taxable income. 3. Next Level Discuss why permanent differences do not impact future periods taxable income and how these differences affect tax rates.
LO.2 Oak Corporation has the following general business credit carryovers. If the general business credit generated by activities during 2019 equals 36,000 and the total credit allowed during the current year is 60,000 (based on tax liability), what amounts of the current general business credit and carryovers are utilized against the 2019 income tax liability? What is the amount of unused credit carried forward to 2020?
Single Temporary Difference: Multiple Rates At the end of 2019, Fulhage Company reported taxable income of 9,000 and pretax financial income of 10,600. The difference is due to depreciation for tax purposes in excess of depreciation for financial reporting purposes. The income tax rate for the current year is 40%, but Congress has enacted tax rates of 35% for 2020 and 30% for 2021 and beyond. Fulhage has calculated the excess of its financial depreciation over its tax depreciation for future years as follows: 2020, 600; 2021, 700; and 2022, 300. Prior to 2019, the company had no deferred tax liability or asset. Required: Prepare Fulhages income tax journal entry at the end of 2019.
E18-4 Single Temporary Difference: Multiple Rates At the end of 2019, Fulhage Company reported taxable income of $9,000 and pretax financial income of $10,600. The difference is due to depreciation for tax purposes in excess of depreciation for financial reporting purposes. The income tax rate for the current year is 40%, but Congress has enacted tax rates of 35% for 2020 and 30% for 2021 and beyond. Fulhage has calculated the excess of its financial depreciation over its tax depreciation for future years as follows: 2020, $600; 2021, $700; and 2022, $300. Prior to 2019, the company had no deferred tax liability or asset. Required: Prepare Fulhage’s income tax journal entry at the end of 2019.
11. The Dot Corporation has changed its year-end from a calendar year-end to August 31. The income for its short period from January 1 to August 31 is $54,000. The tax for this short period is: a.$2,040 b.$8,667 c.$11,340 d.$6,250
19. On January 1, 20x1, ABC Co. extended a P1,000,000 loan to one of its officers as part of ABC’s car and housing assistance program. The note received is due on January 1, 20x4 and bears 10% interest compounded annually. For the year ended December 31,20x3, interest income shall be The correct answer is: 121,000
PR.05.15 Since the SUTA rates changes are made at the end of each year, the available 2019 rates were used for FUTA and SUTA. Note: For this textbook edition the rate 0.6% was used for the net FUTA tax rate for employers. Example 5-10 Karlson Software Company is located in State H, which enables employers to reduce their contribution rates under the experience-rating system. From 2006 to 2015, inclusive, the company's total contributions to state unemployment compensation amounted to $14,665. For the calendar years 2016 to 2019, inclusive, the contribution rate for Karlson was 2.7%. The contributions of each employer are credited to an account maintained by the State Unemployment Compensation Commission. This account is credited with contributions paid into the account by the employer and is charged with unemployment benefits that are paid from the account. Starting January 1, 2020, the contributions rate for all employers in State H will be based on the following tax rate schedule:…
29. Matthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes and when installment payments are received for tax purposes. In 2012, Matthew recognized gross profit of P10,000,000 for financial reporting purposes and P6,000,00 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2013 and 2014 is P2,000,000 each. Matthew guarantees the copying machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expense accrued in 2012 is P2,800,000 but only P1,000,000 of the warranty cost was paid in 2012. It is expected that in 2013 and 2014, P1,100,000 and P700,000, respectively, of warranty costs will be paid. In addition, during 2012, P500,000 interest, net of 20% final income tax, was received and earned, and P200,000 insurance premium on…
25- Our company, which prepares its financial statements on a monthly basis, has leased its workplace on 01.08.2020 from 3.000 TL per month for 1 year. One-year rental fee and 18% VAT have been deposited into the bank account of the enterprise. Assuming that the financial statements are prepared on a monthly basis , in which account, how and in what amount is the rental income for the period January 2021-July 2021 recognized? a) 380 Revenues for the Next Months Hs .36.000 TL Creditor B) 380 Revenues for Future Months Hs. 12.000 TL Creditor NS) 380 Revenues for Future Months Hs. 12.000 TL Debt D) 480 Income for Future Years Hs. 21.000 TL Creditor TO) 480 Income for Future Years Hs. 21.000 TL Debtor
5 A lump sum benefit is payable on termination of service and equal to 1 per cent of final salary for each year of service. The salary in year 1 is P10,000 and is assumed to increase at 7 per cent (compound) each year. The discount rate used is 10 per cent per year. The entity does not fund its obligation to pay lump-sum benefits. The employee is expected to leave at the end of year 5. The amount to be recognized as expense in the second year is Group of answer choices P98 P196 P107 P131
41. The following transaction relate to Tool Company’s contingencies. The financial statements are dated December 31, 2023 and were issued on March 31, 2024. Tool’s products carry one –year warranty against manufacturer defects. Based on past experience, warranty costs are expected to be 4% of sales. Sales for 2023 were P2,000,000 and actual warranty cost incurred was P30,000. In December 2023, an NGO filed suit against Tool seeking penalties for violation of clean air laws. Tool’s counsel advised that is probable that the entity will lose the case and that the amount of penalty is P2,000,000. Appropriately, the entity recorded the liability. On January 15, 2024, Tools reached a settlement to pay P1,500,000 in penalty. Tools is the plaintiff in a P4,000,000 suit filed against a supplier. The attorney advised that it is probable that the entity will win the case and that the award is P2,500,000. On March 15, 2024, the court ruled in favor of Tools and received P2,000,000.…
Problem 10-27 (AICPA Adapted)On December 31, 2020, Ames Company leased equipment for 10 years. Theentity contracted to pay P 400, 000 annual rent on December 31, 2020 andon December 31 of each of the next time years.The lease liability was recorded at P 2, 700, 000 on December 31, 2020before the first payment.The equipment’s useful life is 12 years and the interest rate implicit in thelease is 10%.The entity used the straight line method to depreciate all equipment.1. In recording the December 31, 2021 payment by what amount shouldthe lease liability be reduced?a. 270, 000b. 230, 000c. 225, 000d. 170, 0002. What is the interest expense for 2021?a. 270, 000b. 230, 000c. 200, 000d. 03. What is the lease liability on December 31, 2021?a. 2, 700, 000b. 2, 300, 000c. 2, 130, 000