Crane Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income The income tax expense is $1170000 $1180000. $352000. $234000. O $590000. 2950000 The estimated litigation expense of $2950000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1180000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1180000 current and $1180000 noncurrent. The income tax rate is 20% for all years. (2360000) $1760000

Crane Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income The income tax expense is $1170000 $1180000. $352000. $234000. O $590000. 2950000 The estimated litigation expense of $2950000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1180000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1180000 current and $1180000 noncurrent. The income tax rate is 20% for all years. (2360000) $1760000

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4BCRQ

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At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax income from continuing operations (of which revenues are 295,000), the following items are included in this pretax income: Colts taxable income totals 93,000 in 2019. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2019, Colt had a retained earnings balance of 310.000 and a deferred tax liability of 8,100. During 2019, Colt declared and paid dividends of 48,000. It is subject to tax rates of 15% on the first 50,000 of income and 30% on income in excess of 50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2019 ending deferred tax liability is 14,100. Required: 1. Prepare a schedule for Colt to allocate the total 2019 income tax expense to the various components of pretax income. 2. Prepare Colts income tax journal entry at the end of 2019. 3. Prepare Colts 2019 income statement. 4. Prepare Colts 2019 statement of retained earnings. 5. Show the related income tax disclosures on Colts December 31, 2019, balance sheet.
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
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