Problem 16-13 (IFRS)tax rate is 30%.P450,000 and no deferred tax liability.provision of P500,000The deferred tax asset was due to atime it was tax deductible.P1,000,000 collected in 2019 but earned only in 2020.recognized eachLife insurance premiums of P200,000 wereyear on key officers for 2020 and 2021.The entity paid for a two-year casualty insurance forP6,000,000 on January 1, 2020. The entire premium is tardeductible when paid.The entity collected rent from leasing some of its equipment.The rent is recognized as revenue when earned but taxablewhen collected.202020213,300,0002,500,0003,500,0003,300,000Rent collectedRent earnedThe entity had trading investments. All gains and losses arerecognized for tax purposes when the investments are sold.During 2020, the entity recognized P1,700,000 unrealizedlosses on trading investments which were sold in 2021.Required:1. Compute taxable income for 2020 and 2021.2. Compute current tax expense and total tax expense for2020 and 2021.3. Compute deferred tax asset and deferred tax liability onDecember 31, 2020 and 2021.4. Prépare journal entries for 2020 and 2021.560CSScanned with CamScanner

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Problem 16-13 (IFRS) Complex Company reported pretax accounting income of P12,800,000 for 2020 and P18,300,000 for 2021. The income On January 1, 2020, the entity had deferred tax asset of tax rate is 30%. P450,000 and no deferred tax liability. L wOs due to a provision of P500,000 2020

Problem 16-13 (IFRS) Complex Company reported pretax accounting income of P12,800,000 for 2020 and P18,300,000 for 2021. The income On January 1, 2020, the entity had deferred tax asset of tax rate is 30%. P450,000 and no deferred tax liability. L wOs due to a provision of P500,000 2020

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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Bonus Obligation and Income Tax Expense James Kimberley, president of National Motors, receives a bonus of 10% of Nationals profits above 1,500,000, before the bonus and the corporations income taxes are deducted. Nationals effective income tax rate is 21%. Profits before income taxes and his bonus are 5,000,000 for 2019. Required: 1. Compute the amount of Kimberleys bonus for 2019. 2. Compute National Motors income tax expense for 2019. 3. Prepare journal entries at the end of 2019 to record the bonus and income taxes. 4. Show how the bonus and income taxes would be reported on National Motors December 31,2019, balance sheet.
Deferred Tax Asset and Valuation Account Zeta Corporation reported taxable income for 2019 of 200,000. The enacted tax rate for 2019 is 40%. During 2019, Zeta became the defendant in a lawsuit. The lawsuit has not been resolved at the end of the period, but Zetas lawyers believe that it is probable that the company will be held liable. The legal office estimated that the amount of loss will IK 80,000. AS a result, the lawsuit has been recognized as a contingent liability. However, the legal obligation is not deductible for tax purposes during 2019. The lawsuit represents the only difference between financial income and taxable income for the year. Required: 1. Assume that Zeta Corporation has been quite profitable in past periods and expects to continue that pattern in the future. Record a journal entry to recognize tax expense, tax payable, and deferred tax for 2019. 2. Assume that there is substantial doubt about whether Zeta Corporation will be profitable in future periods. As a result, the company believes that one-half of the future deduction for legal costs will not be realized. Record a journal entry to recognize tax expense, tax payable, and deferred tax for the year. 3. Next Level Explain what circumstances require that a valuation allowance account should be utilized when deferred tax is recognized. How should that account be presented on the financial statements? 4. Prepare your answer to Requirement 2 assuming that Zeta prepares financial statements according to IFRS.
Rhodes Corporations financial statements are shown after part f. Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2020? b. What are the amounts of net operating working capital for both years? c. What are the amounts of total net operating capital for both years? d. What is the free cash flow for 2020? e. What is the ROIC for 2020? f. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
LO.2 Oak Corporation has the following general business credit carryovers. If the general business credit generated by activities during 2019 equals 36,000 and the total credit allowed during the current year is 60,000 (based on tax liability), what amounts of the current general business credit and carryovers are utilized against the 2019 income tax liability? What is the amount of unused credit carried forward to 2020?
Multiple Temporary Differences Vickers Company reports taxable income of 4,500 for 2019. Vickers has two temporary differences between pretax financial income and taxable income at the end of 2019. The first difference is expected to result in taxable amounts totaling 2,470 in future years. The second difference is expected to result in deductible amounts totaling 1,360 in future years. Vickers has a deferred tax asset of 372 and a deferred tax liability of 690 at the beginning of 2019. The current tax rate is 30%, and no change in the tax rate has been enacted for future years. Vickers has positive, verifiable evidence of future taxable income. Required: Prepare Vickerss income tax journal entry at the end of 2019.
LO.2 Osprey Corporation, an accrual basis taxpayer, had taxable income for 2019 and paid 40,000 on its estimated state income tax for the year. During 2019, the company received a 4,000 refund upon filing its 2018 state income tax return. The company filed its 2019 state income tax return in August 2020 and paid the 7,000 state income tax due for 2019. In December 2019, the company received a notice from the state tax commission that an additional 6,000 of income tax was due for 2017 because of an error on the return. The company acknowledged the error in December 2019 and paid the additional 6,000 in tax in February 2020. What is Ospreys 2019 Federal income tax deduction for state income taxes?
Temporary and Permanent Differences Lin has just completed its first year of operations and has a number of differences between its pretax financial income and taxable income. The differences at the end of 2019 are as follows: a. Lin recorded 7,000 of interest revenue on municipal bonds during 2019. b. 15,000 of accrual-basis sales were recognized in income during 2019. They are expected to be received in cash during January 2020. c. Depreciation on machinery totaled 28,000 using straight-line depreciation for financial statements. Lins tax accountant recorded 36,000 of depreciation on the companys tax return. d. Lin was fined 3,000 for violating certain labor laws during 2019. Lin paid the fine during 2019 and agreed to ensure future violations would not occur. e. Bryant Corporation has agreed to rent space from Lin in 2020. In December 2019, Lin received 7,500 from Bryant in advance for rent. f. For 2019, Lin reported 9,500 of warranty expense on its income statement. The companys warranty liability at the end of 2019 was 6,250. Lin expects additional warranty costs to be paid during 2020. Required: 1. For each item, determine if it results in a temporary or permanent difference. If the item results in a temporary difference, determine if it results in a deferred tax asset or deferred tax liability. 2. For each item, determine if it initially results in pretax financial income being greater than or less than taxable income. 3. Next Level Discuss why permanent differences do not impact future periods taxable income and how these differences affect tax rates.
LO.5 Beige Corporation has a fiscal year ending April 30. For the year ending April 30, 2018, Beige generated taxable income of 1,200,000. What is Beige Corporations tax liability for this period?