COMPREHENSIVE EXAMINATION E
Problem Topic Time E-I Long-Term Contracts. 15 min. E-II Installment Sales Method. 20 min. E-III Deferred Income Taxes. 25 min. E-IV Pensions. 15 min. E-V Leases. 25 min. 100 min.
Problem E-I — Long-Term Contracts.
Edwards Company contracted on 4/1/14 to construct a building for $2,400,000. The project was completed in 2016. Additional data follow:
2014 2015 2016 Costs incurred to date $ 560,000 $1,350,000 $1,900,000 Estimated cost to complete 1,040,000 450,000 — Billings to date 500,000 1,900,000 2,400,000 Collections to date 400,000 1,300,000 2,200,000
(a) Calculate the income recognized by…show more content…
(Note: this lease was an operating lease and Dexter classified the unearned rent as a current liability on its balance sheet.)
4. Dexter owns $200,000 of bonds issued by the State of Oregon upon which 5% interest is paid annually. In 2015, Dexter showed $10,000 of income from the bonds on its income statement but did not show any of this amount on its tax return. (Note: these bonds are classified as long-term investments on Dexter's balance sheet.)
5. In 2015, Dexter insured the lives of its chief executives. The premiums paid amounted to $12,000 and this amount was shown as an expense on the income statement. However, this amount was not deducted on the tax return. The company is the beneficiary.
Problem E-III (cont.)
Assuming that the income statement of Dexter Company showed "Income before income taxes" of $1,500,000; that the enacted tax rates are 30% for all years; and that no other differences between book and taxable incomes existed, except for those mentioned above:
(a) Compute the income taxes payable.
(b) Prepare a schedule of future taxable and (deductible) amounts at the end of 2015.
(c) Prepare a schedule of deferred tax (asset) and liability at the end of 2015.
(d) Compute the net deferred tax expense (benefit) for 2015.
(e) Make the journal entry recording income tax expense, income taxes payable, and deferred income taxes for 2015.
(f) Indicate how income tax expense and any deferred income taxes