Green Co. was preparing its year-end financial statements. Green had a pending lawsuit against a competitor for $5,000,000 in damages. Green's attorneys indicate that obtaining a favorable judgment was probable and the amount of damages is reasonably estimated. Green incurred $100,000 in legal fees. The income tax rate was 30%. What amount, if any, should Green recognize as a contingency gain in its financial statements? A B. C. D. SO $4,900,000 $3,500,000 $3,430,000
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- You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: 1. Pretax accounting income was $50 million and taxable income was $6 million for the year ended December 31, 2021. 2. The difference was due to three items: a. Tax depreciation exceeds book depreciation by $40 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($50 million) in 2023 and 2024, respectively. b. Insurance of $8 million was paid in 2021 for 2022 coverage. c. A $4 million loss contingency was accrued in 2021, to be paid in 2023. 3. No temporary differences existed at the beginning of 2021. 4. The tax rate is 25%. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. 2. Assume the enacted federal income tax law specifies that the tax rate will…Saginaw Incorporated completed its first year of operations with a pretax loss of $627,500. The tax return showed a net operating loss of $756,500, which the company will carry forward. The $129,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that it should record a valuation allowance equal to the net deferred tax asset. Assuming the current tax expense is zero, prepare the journal entries to record the deferred tax provision and the valuation allowance. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Required: a. Prepare the journal entry to record the deferred tax consequences for recognition of the current year NOL before considering the valuation allowance. b. Prepare the journal entry to record the deferred tax consequences of the depreciation book-tax difference. c. Prepare the journal entry to record the deferred tax consequences of the valuation…Abbot Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Abbot received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Abbot's current income tax expense or benefit would be:
- You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: Pretax accounting income was $45 million and taxable income was $8 million for the year ended December 31, 2021. The difference was due to three items: Tax depreciation exceeds book depreciation by $30 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($40 million) in 2023 and 2024, respectively. Insurance of $12 million was paid in 2021 for 2022 coverage. A $5 million loss contingency was accrued in 2021, to be paid in 2023. No temporary differences existed at the beginning of 2021. The tax rate is 25%. Required:1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.2. Assume the enacted federal income tax law specifies that the tax rate will change from 25%…Tyson Corporation reported pretax income from operations in Year 1 of 92,000 (the first year of operations). In Year 2, the corporation experienced a $96,000 NOL (pretax loss from operations). Management is confident the company will have taxable income in excess of $120,000 in Year 3. Assume an income tax rate of 25% in Year 1 and thereafter. Tyson has no other temporary differences. Required a. Provide the Year 1 and Year 2 income tax entries that Tyson should make.ABC Inc. is subject to the limitation on business interest expense. During the tax year, ABC Inc. realized $75,000 of interest expense. ABC Inc. had no business interest income. The income from operations was $20,000. ABC Inc. has investment income of $20,000 and depreciation of $10,000. What amount of the business interest realized, if any, will be carried forward to the next tax year? $69,000 $6,000 $0 $75,000 Taxpayer is single and has taxable income of $50,000. What tax does taxpayer pay on this income? Round your answer to the nearest dollar. $6,749 $8,916 $4,664 $11,000
- ou are working with an accounting firm. Sussie, who is representing Suss Co, needs advice about depreciating assets. She asks; what are depreciating assets? What are the different ways to calculate the declining value of depreciating assets? Furthermore, Suss Co has aggregated turnover of $ 2 billion. In December 2021, Suss Co purchased a machine for $4m, which was commenced immediately for an income-producing purpose. What tax does the Suss Co claim?The Sirap Co had sales for the year at $150000. Only $105000 was collected in cash, The remaining $45000 should be collected in cash next year. The income is not taxable until it is collected in cash. The only expense for the business in income tax and the rate is 25% for this year and in all future years. how do you Make all journal entries necessary to record income tax for the year. ?Petroleum, Inc. is in need of tax consulting services and wants to engage an accounting firm to perform these services on its behalf. The following events have occurred: On December 1, Petroleum, Inc., sent Brick, Waterhouse, & Co. (BW&C) a letter, via overnight delivery, offering to engage BW&C to review Petroleum’s tax situation for the current year for $10,000. In the letter, the company stated that BW&C had ten days to accept. On December 5, BW&C sent an e-mail message that stated, “The price for the tax analysis seems too low. We remain interested in the engagement. Would you consider paying $15,000?” Petroleum received the message without responding immediately. The next day, Smith & Taylor, a BW&C competitor, offered to conduct the tax services for $8,000. On learning of this offer, BW&C immediately e-mailed Petroleum, agreeing to do the work for $10,000. Petroleum received this message on December 7. Explain why BW&C and Petroleum do, or do…
- Saginaw Incorporated completed its first year of operations with a pretax loss of $585,000. The tax return showed a net operating loss of $746,000, which the company will carry forward. The $161,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that it should record a valuation allowance equal to the net deferred tax asset. Assume the current tax expense is zero. Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Required: a. Prepare the journal entry to record the deferred tax consequences for recognition of the current year NOL before considering the valuation allowance. b. Prepare the journal entry to record the deferred tax consequences of the depreciation book-tax difference. c. Prepare the journal entry to record the deferred tax consequences of the valuation allowance. No 1 2 Transaction a b Deferred tax asset Deferred tax benefit Deferred tax expense X…How do I answer this? Carrot Company has been profitable in the past and expects to remain profitable in the future. Carrot sells a product for which it provides a 5-year warranty. For financial reporting purposes, Carrot estimates its future warranty costs and records a warranty expense and liability at year-end, whereas for income tax purposes the company deducts its warranty costs when paid. At the beginning of the current year, Carrot had a deferred tax asset of $500 related to the warranty liability on its balance sheet. At the end of the current year, the company estimates that its ending warranty liability is $2,000 Carrot had current year taxable income of $10,000 and is subject to an enacted future tax rate of 30%. Prepare a schedule to compute Carrot's (a) ending future deductible amount, (b) ending deferred tax asset, and (c) change in deferred tax asset for the current year (deferred tax benefit). For those boxes in which you must enter subtractive or negative number, use…Labrador Corp. reports a net operating loss of $100,000 during its first year of operations. The company is subject to a tax rate of 30%. Management expects that taxable income will more likely than not be $50,000 during Year 2 and $80,000 during Year 3. What is the amount of the deferred tax asset that will be recognized at the end of Year 1? deferred tax asset