Financial Accounting-w/cd-package
3rd Edition
ISBN: 9780131060876
Author: REIMERS
Publisher: PEARSON
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Chapter 10, Problem 16EA
To determine
Compute the net income of Company DC.
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In 20X6, Dalia Corp., a calendar fiscal-year company, discovered that depreciation expense was erroneously overstated $67,000 in
both 20X4 and 20X5 for financial reporting purposes. Net income in 20X6 is correct. The tax rate is 25%. The error was made only for
financial reporting, affecting depreciation and deferred income tax accounts. CCA had been recorded correctly, and thus there will be
no change in taxes payable.
Additional Information:
20X6
20X5
Beginning retained earnings
$454,000
$430,400
Earnings (includes error in 20X5)
Dividends declared
85,400
95,900
62,200
72,300
A corporation sold a piece of equipment during the current tax year for $78,600. The accounting records show that its cost basis, B, is $190,000 and the accumulated depreciation is $139,200. Assume that the effective income tax rate as a decimal is 0.40 (40%). Based on this information, Solve, what is (a) the gain (loss) on disposal, (b) the tax liability (or credit) resulting from this sale, (c) the tax liability (or credit) if the accumulated depreciation was $92,400 instead of $139,200 ?
In 20X6, Dalia Corp., a calendar fiscal-year company, discovered that depreciation expense was erroneously overstated $67,000 in
both 20X4 and 20X5 for financial reporting purposes. Net income in 20X6 is correct. The tax rate is 25%. The error was made only for
financial reporting, affecting depreciation and deferred income tax accounts. CCA had been recorded correctly, and thus there will be
ho change in taxes payable.
Additional information:
20X6
20X5
Beginning retained earnings
$454,000
Earnings (includes error in 20X5)
Dividends declared
85,400
62,200
$430,400
95,900
72,300
Required:
1. Record the entry in 20X6 to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in
the first account field.)
View transaction list
Journal entry worksheet
1
Record the entry for 20X6 to correct the error.
Chapter 10 Solutions
Financial Accounting-w/cd-package
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- In 20X6, Dalia Corp., a calendar fiscal-year company, discovered that depreciation expense was erroneously overstated $58,000 in both 20X4 and 20X5 for financial reporting purposes. Net income in 20X6 is correct. The tax rate is 30%. The error was made only for financial reporting, affecting depreciation and deferred income tax accounts. CCA had been recorded correctly, and thus there will be no change in taxes payable. Additional information: 20X6 S Beginning retained earnings $446,000 20X5 $424,100 Earnings (includes error in 20x5) Dividends declared 83,800 61,300 94,200 2,300 Required: 1. Record the entry in 20X6 to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forwardFor the events described below, select the taxrelated term from the following list that best applies: gross income, depreciation, operating expense, taxable income, income tax, or net operating profit after taxes. (a) A corporation reports that it had a negative $1,750,000 net profit on its annual income statement. (b) An asset with a current book value of $120,000 was utilized on a new processing line to increase sales by $200,000 this year. (c) A machine has an annual write-off of $21,000. (d ) The cost to maintain quality assurance equipment during the past year was $75,000. (e) A supermarket collected $24,000 in lottery ticket sales last year. Based on the winnings paid to individuals holding these tickets, a rebate of $250 was sent to the store manager. ( f ) An asset with a book value of $8000 was retired and sold for $8450. (g) The cost of goods sold in the past year was $3,680,200. (h) An over-the-counter software system will generate $420,000 in revenue this quarterarrow_forwardWindsor, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a S222000 loss in the year of disposal. The loss on disposal of the segment was S122000. If the tax rate is 32%, and income before income taxes was $1622000, net income is $1278000. the losses from discontinued operations are reported net of income taxes at $344000. the income tax expense on the income before discontinued operations is $454080. the income from continuing operations is $1102960.arrow_forward
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