Chapter 19 Solution

1. Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement

Hoffman, W., Maloney, D., Raabe, W., & Young, J. (2013). Federal Taxation Comprehensive Volume. (36 ed.). Ohio: South-W

2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years?

According to AASB 112, main principal of tax effect is to recognize deferred tax asset or deferred tax liability if it is probable that future recovery or settlement of asset or liability makes future tax payments larger or smaller. Requirements are to separately disclose main parts of tax expense, aggregate current and deferred tax relating to items recognized directly in equity, information demonstrating a relationship between tax expense & company’s accounting profit, and certain information relevant to temporary differences and deferred tax assets.

year 1, 2, and 3 tax deductions and book-tax differences (indicate whether permanent and/or temporary)

 Explain how the data collected will provide the data necessary to support or negate the hypothesis or proposition

|Individual |Write a 700- to 1,050-word paper in which you do the following: |6/20/13 |9 |

6. Calculate Net Income (and its percentage difference) if Exxon used FIFO instead of LIFO in 2011.

9781435463509, Payroll Accounting, 2012 Edition, Bernard J. Bieg - © Cengage Learning. All rights reserved. No distribution allowed without express authorization

Issue 1 facts: As a result of implementing a certain tax strategy, the Company has included a $100

Another material difference is deferred income tax assets that went from $483,000 to $19,094,000. Totaling a significant difference of $18,611,000.

It is critical to understand that the transaction events which give rise to timing differences are economic in nature and therefore have economic consequences. The question then becomes how to best reflect those economic consequences in the financial statements. Inter-period income tax allocation considers the tax consequences of transaction events such as revenue, expenses, gains, and losses and associates these items with the period in which these events are recognized. In other words, inter-period tax allocation is consistent with the basic tenets of accrual accounting. Underlying this method is the understanding that there is a direct economic relationship between identifiable transactions reflected in the financial statements and related income tax effects (Arthur et al., 1984). Therefore, each transaction has a tax effect.

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For tax purposes, it is important to forecast cash flow and income. Sally, in Y1 you posted taxable income of $250k, in Y2 $10k, and in Y3 $150K. Were these numbers based on actual gross sales, or did your deductions and depreciation change drastically between Y1 and Y2?

with a new partner, Harry Fowl. Harry has had some existing business and you are