At the beginning of 2016, Norris Company had a deferred tax liability of $6,400, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015Congress enacted a 37% tax rate for 2017 and future years.Norris's accounting records show the following pretax items of financial income for 2016: income from continuing operations, $119,300 (revenues of $351,000 and expenses of $231,700); gain on disposal of Division F, S21,300; loss from operations of discontinuedDivision F, $8,700; and prior period adjustment, $14,800, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $5,400. Norris had aretained earnings balance of $163,000 on January 1, 2016, and declared and paid cash dividends of $30,300 during 2016.Required:1. Prepare Norris's income tax journal entry at the end of 2016.2. Prepare Norris's 2016 income statement.3. Prepare Norris's 2016 statement of retained earnings.4. Show the related income tax disclosures on Norris's December 31, 2016, balance sheet.

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Answered: At the beginning of 2016, Norris…

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 13P

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Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350
In the current year, Madison Corporation had 50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a Warranty liability for financial reporting purposes of 5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes. Prepare the journal entry to record Madisons income taxes at the end of the year.
At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,300 (revenues of $351,500 and expenses of $231,200); gain on disposal of Division F, $24,000; loss from operations of discontinued Division F, $11,500; and prior period adjustment, $14,100, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,600. Norris had a retained earnings balance of $161,300 on January 1, 2016, and declared and paid cash dividends of $32,800 during 2016. Required: 1.…
The whole question is as follows: At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,300 (revenues of $351,500 and expenses of $231,200); gain on disposal of Division F, $24,000; loss from operations of discontinued Division F, $11,500; and prior period adjustment, $14,100, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,600. Norris had a retained earnings balance of $161,300 on January 1, 2016, and declared and paid cash dividends of $32,800…
The company reported $58,000 of depreciation expense on its income statement in 2015 and $32,000 in 2016. On its tax returns, Morgan deducted $84,000 for depreciation in 2015 and $94,000 in 2013. The 2016 tax return shows a tax obligation (liability) of $38,400 based on a 40% tax rate. Deferred Income Taxes What is the deferred tax liability for 2016?
company reported $58,000 of depreciation expense on its income statement in 2015 and $32,000 in 2016. On its tax returns, Morgan deducted $84,000 for depreciation in 2015 and $94,000 in 2013. The 2016 tax return shows a tax obligation (liability) of $38,400 based on a 40% tax rate.Deferred Income Taxes What is the deferred tax liability for 2016?
Rowen, Inc. had pre-tax accounting income of $1,672,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions: Received rent from Jane, Co. for 2016 $64,000 Municipal bond income $80,000 Depreciation for tax purposes in excess of book depreciation $40,000 Installment sales revenue to be collected in 2016 $108,000 6. At the end of 2015, which of the following deferred tax accounts and balances is reported on Rowen, Inc.’s balance sheet? Account Balance a. Deferred tax asset $32,000 b. Deferred tax liability $32,000 c. Deferred tax asset $59,200 d. Deferred tax liability $59,200
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Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses: Revenues Expenses 2017 $253,000 $180,000 2018 241,000 196,000 Ross was subject to the following income tax rates during this period: 2017, 30%; and 2018, 25%. During 2019, Ross experienced a severe decrease in the demand for its products. The company tried to offset this decrease with an expensive marketing campaign, but was unsuccessful. Consequently, at the end of 2019, Ross determined that its revenues were $60,000 and its expenses were $193,000 for both income taxes and financial reporting. At the end of 2019 due to increasing competition, Ross deemed that it was more likely than not that 50% of the future deductible amount will not be realized. The income tax rate was 21% for the entire…
In 2016, its first year of operations, Wilber Company reported pretax accounting income of $60,000. Included in the $60,000 was an expense for accrued, unpaid warranty costs of $8,000, which are not deductible until paid for income tax purposes. Wilber's income tax rate was 20%. The entry to record the income tax expense would include a credit to Income Tax Expense for $12,000. debit to Deferred Tax Asset for $1,600. credit to Income Taxes Payable for $12,000. credit to Deferred Tax Liability for $1,600.

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