P9-13 (Static) Recording and Reporting Deferred Income Tax: Depreciation (Supplement B) LO9-6 [The following information applies to the questions displayed below.] Mansfield Corporation purchased a new piece of equipment at the beginning of Year 1 for $1,000,000. The expected life of the asset is 20 years with no residual value. The company uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes (the accelerated method results in $100,000 of depreciation each year). The company's federal income tax rate is 21%. The company determined its income tax obligations for Year 1 and Year 2 were $400,000 and $625,000, respectively. P9-13 Part 1 Required: 1-a. Compute the deferred income tax amount reported on the balance sheet for each year. Deferred Income Tax Year 1 $ 950,000 Year 2

P9-13 (Static) Recording and Reporting Deferred Income Tax: Depreciation (Supplement B) LO9-6 [The following information applies to the questions displayed below.] Mansfield Corporation purchased a new piece of equipment at the beginning of Year 1 for $1,000,000. The expected life of the asset is 20 years with no residual value. The company uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes (the accelerated method results in $100,000 of depreciation each year). The company's federal income tax rate is 21%. The company determined its income tax obligations for Year 1 and Year 2 were $400,000 and $625,000, respectively. P9-13 Part 1 Required: 1-a. Compute the deferred income tax amount reported on the balance sheet for each year. Deferred Income Tax Year 1 $ 950,000 Year 2

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 5RE: Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year....

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Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year. Turnip uses differing depreciation methods for financial reporting and income tax purposes. The depreciation expense during the current year for financial reporting is 1,000 and for income tax purposes is 2,000. Turnip is subject to a 30% enacted future tax rate. Prepare a schedule to compute Turnips (a) ending future taxable amount, (b) ending deferred tax liability, and (c) change in deferred tax liability (deferred tax expense) for the current year.
Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $800,000 and with an expected useful life of four years and no residual value. For tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $900,000, which includes interest revenue of $20,000 from municipal bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 40%. Prepare the journal entry to record income taxes.
LOVE INC. has a policy of using non-current assets until they can no longer operate and are worthless. On January 1, 2015, it acquired an item of plant and machinery for P100,000. It is being depreciated over 10 years on a straight-line basis. For tax purposes, there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals.What deferred tax balance should LOVE recognized at December 31, 2015, according to PAS 12 Income taxes? a. Deferred tax asset of P2,500b. Deferred tax asset of P1,500c. Deferred tax liability of P2,500 d. Deferred tax liability of P1,500.
7. Several years ago, Pentair purchased equipment for $23,500,000. Pentair uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $21,150,000 and its tax basis was $17,625,000. At December 31, 2021, the carrying value of the equipment was $18,800,000 and the tax basis was $12,925,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $28,500,000. A tax rate of 25% applies to all years. Required:Prepare the journal entry to record Pentair's income tax expense for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
As a result of differences between depreciation for financial reporting purposes and tax purposes, the financial reporting basis of Noor Co.’s sole depreciation asset, acquired in 20x1, exceeded its tax basis by P250,000 at December 31, 20x1. This difference will reverse in future years. The enacted tax rate is 30% for 20x1, and 40% for future years. Noor has no other temporary differences. In its December 31, 2001, balance sheet, how should Noor report the deferred tax effect of this difference - Asset (Liability)? a. 75,000 b. (100,000) c. 100,000 d. (75,000)
2. On January 1, 2019, KRIS KRINGLE Company purchased a ₱600,000 machine, with a five-year useful life and no residual value. The machine was depreciated by an accelerated method for book and tax purposes. The carrying amount was ₱240,000 on December 31, 2020. On January 1, 2021, the entity changed to the straight-line method for financial reporting purposes. The income tax rate is 30%. On January 1, 2021, what amount should be reported as deferred tax liability as a result of the change? ₱ 36,000 ₱ - 0 - ₱ 72,000 ₱ 120,000
Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $720,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $820,000, which includes interest revenue of $22,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%. Prepare the journal entry to record income taxes. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
5. On January 2, 20x1, Ross Co. purchased a machine for P70,000. This machine has a 5-year useful life, a residual value of P10,000, and is depreciated using the straight-line method for financial statement purposes. For tax-purposes, depreciation expense was P25,000 for 20x1 and P20,000 for 20x2. Ross’ 20x2 income, before income taxes and depreciation expense, was P100,000 and its tax rate was 30%. If Ross had made no estimated tax payments during 20x2, what amount of current income tax liability would Ross report in its December 31, 20x2 balance sheet?
ABC Company purchased a machine costing P 10,000,000 on January 1, 2021 with an estimated useful life of 10 years and residual value of P 500,000. It is the company's policy to depreciate this type of asset using double declining balance but for tax purposes, straight-line method is being used. The enacted tax rate for the current and next periods would be 30% and for the last 3 years in the life of the machine the enacted tax rate would be 32%.ABC Company computed the following income in its income tax return for the following years:2021 1,500,0002022 2,000,0002023 2,500,0002024 3,000,0002025 2,750,0002026 3,500,0002027 4,000,0002028 3,750,0002029 1,750,0002030 4,500,000Other than the difference in the depreciation method being used for the machine, there is no other difference between ABC's accounting and taxable income during the life of the asset.How much is the income tax payable as of December 31,2025?
Novak Corporation purchased equipment very late in 2020. Based on generous capital cost allowance rates provided in the Income Tax Act, Novak Corporation claimed CCA on its 2020 tax return but did not record any depreciation because the equipment was being tested. This temporary difference will reverse and cause taxable amounts of $30,700 in 2021, $31,300 in 2022, and $45,000 in 2023. Novak’s accounting income for 2020 is $236,000 and $202,000 in each of 2021 and 2022, and the tax rate is 30%. There are no deferred tax accounts at the beginning of 2020. Novak Corporation was informed on December 31, 2021 that the enacted rate for 2022 and subsequent years is 25%. a) Calculate the deferred tax balances at December 31, 2021 and 2022. b) Calculate taxable income and income tax payable for 2021 and 2022. c) Prepare the income tax expense section of the income statement for 2021, beginning with the line “Income before income tax. d) Prepare the income tax expense section of the income…
Several years ago, Western Electric Corp. purchased equipment for $21,000,000. Western uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $18,900,000 and its tax basis was $15,750,000. At December 31, 2021, the carrying value of the equipment was $16,800,000 and the tax basis was $11,550,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $26,000,000. A tax rate of 25% applies to all years. Required:Prepare the journal entry to record Western's income tax expense for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $540,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $640,000, which includes interest revenue of $12,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%.