P19.8 (LO 1, 2, 4) (Two Differences, 2 Years, Compute Taxable Income and Pretax Financial Income) The following information was disclosed during the audit of Zheng Group. Year Amount Due 1. per Tax Return 2022 ¥130,000,000 2023 104,000,000 2. On January 1, 2022, equipment costing ¥600,000,000 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the double-declining balance method over 5 years. 3. In January 2023, ¥225,000,000 is collected in advance rental of a building for a 3-year period. The entire Y225,000,000 is reported as taxable income in 2023, but Y150,000,000 of the Y225,000,000 is reported as unearned revenue in 2023 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2024 and 2025. 4. The tax rate is 40% in 2022 and all subsequent periods. (Hint: To find taxable income in 2022 and 2023, the related income taxes payable amounts will have to be "grossed up.") 5. No temporary differences existed at the end of 2021. Zheng expects to report taxable income in each of the next 5 years. Instructions a. Determine the amount to report for deferred income taxes at the end of 2022, and indicate how it should be classified on the statement of financial position. b. Prepare the journal entry to record income taxes for 2022. c. Draft the income tax section of the income statement for 2022, beginning with "Income before income taxes." (Hint: You must compute taxable income and then combine that with changes in cumulative temporary differences to arrive at pretax financial income.) d. Determine the deferred income taxes at the end of 2023, and indicate how they should be classified on the statement of financial position. e. Prepare the journal entry to record income taxes for 2023. f. Draft the income tax section of the income statement for 2023, beginning with “Income before income taxes."
P19.8 (LO 1, 2, 4) (Two Differences, 2 Years, Compute Taxable Income and Pretax Financial Income) The following information was disclosed during the audit of Zheng Group. Year Amount Due 1. per Tax Return 2022 ¥130,000,000 2023 104,000,000 2. On January 1, 2022, equipment costing ¥600,000,000 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the double-declining balance method over 5 years. 3. In January 2023, ¥225,000,000 is collected in advance rental of a building for a 3-year period. The entire Y225,000,000 is reported as taxable income in 2023, but Y150,000,000 of the Y225,000,000 is reported as unearned revenue in 2023 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2024 and 2025. 4. The tax rate is 40% in 2022 and all subsequent periods. (Hint: To find taxable income in 2022 and 2023, the related income taxes payable amounts will have to be "grossed up.") 5. No temporary differences existed at the end of 2021. Zheng expects to report taxable income in each of the next 5 years. Instructions a. Determine the amount to report for deferred income taxes at the end of 2022, and indicate how it should be classified on the statement of financial position. b. Prepare the journal entry to record income taxes for 2022. c. Draft the income tax section of the income statement for 2022, beginning with "Income before income taxes." (Hint: You must compute taxable income and then combine that with changes in cumulative temporary differences to arrive at pretax financial income.) d. Determine the deferred income taxes at the end of 2023, and indicate how they should be classified on the statement of financial position. e. Prepare the journal entry to record income taxes for 2023. f. Draft the income tax section of the income statement for 2023, beginning with “Income before income taxes."
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 14P
Related questions
Question
Transcribed Image Text:P19.8 (LO 1, 2, 4) (Two Differences, 2 Years, Compute Taxable
Income and Pretax Financial Income) The following information was
disclosed during the audit of Zheng Group.
Year Amount Due
1.
per Tax Return
2022 ¥130,000,000
2023
104,000,000
2. On January 1, 2022, equipment costing ¥600,000,000 is purchased.
For financial reporting purposes, the company uses straight-line
depreciation over a 5-year life. For tax purposes, the company uses the
double-declining balance method over 5 years.
3. In January 2023, ¥225,000,000 is collected
building for a 3-year period. The entire ¥225,000,000 is reported as
taxable income in 2023, but ¥150,000,000 of the ¥225,000,000 is
reported as unearned revenue in 2023 for financial reporting purposes.
The remaining amount of unearned revenue is to be recognized
equally in 2024 and 2025.
advance rental of a
4. The tax rate is 40% in 2022 and all subsequent periods. (Hint: To find
taxable income in 2022 and 2023, the related income taxes payable
amounts will have to be "grossed up.")
5. No temporary differences existed at the end of 2021. Zheng expects to
report taxable income in each of the next 5 years.
Instructions
a. Determine the amount to report for deferred income taxes at the end
of 2022, and indicate how it should be classified on the statement of
financial position.
b. Prepare the journal entry to record income taxes for 2022.
c. Draft the income tax section of the income statement for 2022,
beginning with "Income before income taxes." (Hint: You must
compute taxable income and then combine that with changes in
cumulative temporary differences to arrive at pretax financial income.)
d. Determine the deferred income taxes at the end of 2023, and indicate
how they should be classified on the statement of financial position.
e. Prepare the journal entry to record income taxes for 2023.
f. Draft the income tax section of the income statement for 2023,
beginning with “Income before income taxes."
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