Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plansto use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deductionis 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $520,000, which includes interestrevenue of $60,000 from municipal governmental bonds. The enacted tax rate is 25%.Assuming no differences between accounting income and taxable income other than those described above:Required:1. Complete the following table given below and prepare the journal entry to record income taxes in 2021.2. What is Southern Atlantic's 2021 net income?Complete this question by entering your answers in the tabs below.Required 1 Required 1 GJ Required 2CalculationPrepare the journal entry to record income taxes in 2021. (If no entry is required for a transaction/event, select "No journal entryrequired" in the first account field. Enter your answers in whole dollars.)View transaction listJournal entry worksheet< 1Record 2021 income taxes.Note: Enter debits before credits.Transaction1Record entryGeneral JournalClear entryDebitCreditView general journal>Complete this question by entering your answers in the tabs below.Required 1 Required 1 GJ Required 2CalculationWhat is Southern Atlantic's 2021 net income? (Enter your answer in whole dollar.)Net income< Required 1 GJRequired 2 > Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plansto use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deductionis 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $520,000, which includes interestrevenue of $60,000 from municipal governmental bonds. The enacted tax rate is 25%.Assuming no differences between accounting income and taxable income other than those described above:Required:1. Complete the following table given below and prepare the journal entry to record income taxes in 2021.2. What is Southern Atlantic's 2021 net income?Complete this question by entering your answers in the tabs below.Required 1CalculationRequired 1 GJ Required 2Complete the following table given below to record income taxes in 2021. (Amounts to be deducted should be indicated with aminus sign. Enter your answers in whole dollars.)Pretax accounting incomePermanent differenceIncome subject to taxationTemporary differenceIncome taxable in current year$ 520,000$ 520,000 xX$ 520,000 xTax Rate %< Required 1 Calculation25%==Tax $$ 130,000Recorded as:Required 1 GJ >

Solution: Taxable income = Pretax income - Favorable permanent differences - Favorable temporary…

Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $520,000, which includes interest revenue of $60,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table given below and prepare the journal entry to record income taxes in 2021. 2. What is Southern Atlantic's 2021 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation Required 1 GJ Required 2

Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2021, 30% in 2022, and 20% in 2023. Pretax accounting income for 2021 was $520,000, which includes interest revenue of $60,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table given below and prepare the journal entry to record income taxes in 2021. 2. What is Southern Atlantic's 2021 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation Required 1 GJ Required 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

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 14P: Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used...

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Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2019. Gross receipts were 300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 810, 2020. a. Calculate Ducks net income from the concert for tax purposes for 2019. b. Using the present value tables in Appendix H, what is the true cost to Duck if it had to defer the 100,000 deduction for the performers until 2020? Assume a 5% discount rate and a 21% marginal tax rate in 2019 and 2020.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.