Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 16, Problem 16.14E
Multiple differences
• LO16–4, LO16–6
For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2018 from Fidelity’s records follows:
| Interest income on municipal bonds | $32,000 |
| 55,000 | |
| Carrying amount of depreciable assets in excess of their tax basis at year-end | 85,000 |
| Warranty expense reported on the income statement | 26,000 |
| Actual warranty expenditures in 2018 | 16,000 |
Fidelity’s income tax rate is 40%. At January 1, 2018, Fidelity’s records indicated balances of zero and $12,000 in its
Required:
1. Determine the amounts necessary to record income taxes for 2018, and prepare the appropriate
2. What is Fidelity’s 2018 net income?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Intermediate Accounting ll ch 16
7. At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $25 million attributable to a temporary book-tax difference of $100 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $64 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2024 is $180 million and the tax rate is 25%.
Required:
Prepare the journal entry(s) to record Payne’s income taxes for 2024, assuming it is more likely than not that the deferred tax asset will be realized in full.
Prepare the journal entry(s) to record Payne’s income taxes for 2024, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
Required 1
Record 2024 income taxes
Transaction
General Journal
Debit
Credit
1
Record…
Problem 6-55 (LO. 3)
For 2021, MSU Corporation has $500,000 of adjusted taxable income, $22,000 of business interest income, and $120,000 of business interest expense. It has average annual gross receipts of more than $26,000,000 over the prior three taxable years.
a. What is MSU's interest expense deduction for 2021?$fill in the blank 1
b. How much interest expense can be deducted for 2021 if MSU's adjusted taxable income is $300,000?$fill in the blank 2
Rr.12.
1.) Calculate taxable income for 20X2
answer: 139,000
2.) Calculate taxes payable for 20X2
answer: 20,850
3.) Determine the current deferred tax liability at 12/31/X2
answer: 37200
4.) calculate total income tax expense for 20X2
answer: 58,050
5.) Compute net income after taxes for 20X2
answer: 328,950
6.) Calculate taxable income for 20X3
answer: 213,027
7.) The entry required at the end of 20X3 requires
answer: debit DTL for 26,040
8.) Compute net income after taxes for 20X3
answer: ???
9.) Calculate taxable income for 20X4
answer: 196,800
10.) Compute net income after taxes for 20X4
answer: ???
Using the information above, solve for parts 8 and 10
Chapter 16 Solutions
Intermediate Accounting
Ch. 16 - Prob. 16.1QCh. 16 - A deferred tax liability (or asset) is described...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Temporary differences result in future taxable or...Ch. 16 - Identify three examples of differences with no...Ch. 16 - The income tax rate for Hudson Refinery has been...Ch. 16 - Suppose a tax reform bill is enacted that causes...Ch. 16 - A net operating loss occurs when tax-deductible...Ch. 16 - Prob. 16.10Q
Ch. 16 - Additional disclosures are required pertaining to...Ch. 16 - Additional disclosures are required pertaining to...Ch. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - IFRS and U.S. GAAP follow similar approaches to...Ch. 16 - Temporary difference LO161 A company reports...Ch. 16 - Prob. 16.2BECh. 16 - Temporary difference LO162 A company reports...Ch. 16 - Prob. 16.4BECh. 16 - Temporary difference; income tax payable given ...Ch. 16 - Valuation allowance LO162, LO163 At the end of...Ch. 16 - Valuation allowance LO162, LO163 VeriFone Systems...Ch. 16 - Temporary and permanent differences; determine...Ch. 16 - Calculate taxable income LO161, LO164 Shannon...Ch. 16 - Multiple tax rates LO165 J-Matt, Inc., had pretax...Ch. 16 - Change in tax rate LO165 Superior Developers...Ch. 16 - Net operating loss carryforward LO167 During its...Ch. 16 - Net operating loss carryback LO167 AirParts...Ch. 16 - Tax uncertainty LO169 First Bank has some...Ch. 16 - Intraperiod tax allocation LO1610 Southeast...Ch. 16 - Temporary difference; taxable income given LO161...Ch. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Identify future taxable amounts and future...Ch. 16 - Calculate income tax amounts under various...Ch. 16 - Determine taxable income LO161, LO162 Eight...Ch. 16 - Prob. 16.10ECh. 16 - Deferred tax asset; income tax payable given;...Ch. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Multiple differences LO164, LO166 For the year...Ch. 16 - Multiple t ax rates LO162, LO165 Allmond...Ch. 16 - Prob. 16.16ECh. 16 - Deferred taxes; change in tax rates LO161, LO165...Ch. 16 - Multiple temporary differences; record income...Ch. 16 - Multiple temporary differences; record income...Ch. 16 - Net operating loss carryforward LO167 During...Ch. 16 - Net operating loss carryback LO167 Wynn Sheet...Ch. 16 - Net operating loss carryback and carryforward ...Ch. 16 - Identifying income tax deferrals LO161, LO162,...Ch. 16 - Multiple temporary differences; balance sheet...Ch. 16 - Multiple tax rates LO161, LO164, LO165 Case...Ch. 16 - Prob. 16.26ECh. 16 - Balance sheet classification LO168 As of December...Ch. 16 - Concepts; terminology LO161 through LO168 Listed...Ch. 16 - Tax credit; uncertainty regarding sustainability ...Ch. 16 - Intraperiod tax allocation LO1610 The following...Ch. 16 - FASB codification research LO165, LO168, LO1610...Ch. 16 - Prob. 16.1PCh. 16 - Prob. 16.2PCh. 16 - Prob. 16.3PCh. 16 - Prob. 16.4PCh. 16 - Change in tax rate; record taxes for four years ...Ch. 16 - Multiple differences; temporary difference yet to...Ch. 16 - Multiple differences; calculate taxable income;...Ch. 16 - Multiple differences; taxable income given; two...Ch. 16 - Determine deferred tax assets and liabilities ...Ch. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Prob. 16.12PCh. 16 - Prob. 16.13PCh. 16 - Prob. 16.1BYPCh. 16 - Prob. 16.2BYPCh. 16 - Integrating Case 163 Tax effects of accounting...Ch. 16 - Communication Case 164 Deferred taxes; changing...Ch. 16 - Prob. 16.5BYPCh. 16 - Research Case 166 Researching the way tax...Ch. 16 - Analysis Case 167 Reporting deferred taxes; Ford...Ch. 16 - Prob. 16.8BYPCh. 16 - Judgment Case 169 Analyzing the effect of deferred...Ch. 16 - Prob. 16.12BYPCh. 16 - Target Case LO16-1, LO16-2, LO16-4, LO16-8,...Ch. 16 - Prob. 1CCIFRS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- [8:50 PM, 2/23/2022] Veron Walker Uwi: Grace Corporation's pretax financial income is $600,000 and taxable income is $550,000 for year 2020.Its beginning deferred tax liability account has a balance of $75,000. Its cumulative temporarydifferences for year-end 2020 is equal to $300,000 and will reverse and result in taxable amounts as follows: Year Taxable Amount2021 $100,0002022 $ 75,0002023 $125,000The tax rate is 30% for all years.[8:50 PM, 2/23/2022] Veron Walker Uwi: Required:(i) Calculate the taxes payable for the year 2020(ii) Calculate the deferred tax liability for the year 2020(iii) Calculate the total tax expense for 2020(iv) Prepare the journal entry to record the tax expense for 2020(v) Prepare the income statement presentation of the tax amounarrow_forwardHw.5. Facts Ryan recently disposed Bitcoin but initially did not report this. After an ATO investigation, the ATO issued an Amended Notice of Amendment which reported that he would be liable to pay tax liability totalling $100,000 and this was due 1 January 2021. As Ryan did not have access to additional funds in the short term, Ryan was only able to pay the ATO debt 1 January 2022. Question Advise Ryan whether he can challenge the new liability imposed. Assuming Ryan cannot challenge the new liability imposed, advise what administrative penalty and interest charges Ryan will be subject to and what information need to be provided to request a penalty and interest charge reversal.arrow_forwardIntermediate Accounting ll ch 16 6. The information that follows pertains to Richards Refrigeration, Incorporated: At December 31, 2024, temporary differences existed between the financial statement book values and the tax bases of the following: ($ in millions) Book Value Tax Basis Future Taxable (Deductible) Amount Buildings and equipment (net of accumulated depreciation) $ 120 $ 90 $ 30 Prepaid insurance 50 0 50 Liability-Loss contingency 25 0 (25) No temporary differences existed at the beginning of 2024. Pretax accounting income was $200 million and taxable income was $145 million for the year ended December 31, 2024. The tax rate is 25%. Required: Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2024. What is the 2024 net income? General Journal Record 2024 income taxes Transaction General Journal Debit Credit 1arrow_forward
- Intermediate Accounting ll ch 16 5. On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $48 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2023, the book value of the equipment was $42 million and its tax basis was $32 million. At December 31, 2024, the book value of the equipment was $40 million and its tax basis was $25 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $30 million. Required: Prepare the appropriate journal entry to record Ameen’s 2024 income taxes. Assume an income tax rate of 25%. What is Ameen’s 2024 net income?arrow_forwardProblem 7-44 (LO 7-4) Haneen has taxable income of $124,000 without consideration of capital gain or loss transactions. Haneen has a short-term capital gain of $19,000, a long-term capital loss of $11,000, and a short-term capital gain of $5,000. Assume none of the gains or losses are from collectibles or unrecaptured § 1250 property, and Haneen is in the 24% tax bracket. Required: What is the total short-term gain or loss? What is the total long-term gain or loss? What is the carryover amount?arrow_forwardProblem 16-7 (Algo) Multiple differences; calculate taxable income; balance sheet classification [LO16-2, 16-3, 16-5, 16-8] Sherrod, Inc., reported pretax accounting income of $92 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $6 million. The installment receivable account at year-end 2021 had a balance of $8 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $3 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $104 million. Depreciation is reported by the straight-line method, assuming a four-year…arrow_forward
- Immediate Accounting ll Ch 16 3. During 2024, its first year of operations, Baginski Steel Corporation reported a net operating loss of $360,000 for financial reporting and tax purposes. The enacted tax rate is 25%. Required: Prepare the journal entry to recognize the income tax benefit of the net operating loss. Assume the weight of available evidence suggests that future taxable income will be sufficient to benefit from future deductible amounts arising from the net operating loss carryforward. Show the lower portion of the 2024 income statement that reports the income tax benefit of the net operating loss. Required 1 Record 2024 income tax benefit from operating loss Transaction General Journal Debit Credit 1arrow_forwardExercise 8-24 (LO. 3) McKenzie purchased qualifying equipment for his business that cost $212,000 in 2020. The taxable income of the business for the year is $5,600 before consideration of any § 179 deduction. If an amount is zero, enter "0". a. Calculate McKenzie's § 179 expense deduction for 2020 and any carryover to 2021.§ 179 expense deduction for 2020: $fill in the blank 1§ 179 carryover to 2021: $fill in the blank 2 b. How would your answer change if McKenzie decided to use additional first-year (bonus) depreciation on the equipment instead of using § 179 expensing? Hint: See Concept Summary 8.3.§ 179 expense deduction for 2020: $fill in the blank 3§ 179 carryover to 2021: $fill in the blank 4 Summary of Tables Exhibit 8.3 Regular MACRS table for personalty. Depreciation methods: 200 or 150 percent declining-balance switching to straight-line. Recovery periods: 3, 5, 7, 10, 15, 20 years. Convention: half-year.arrow_forwardMa3. All final answers, unless otherwise indicated, have been rounded to the nearest $10. Also, assume that each question is independent of any other question. please answer questions using tax rules in effect for the year 2021, but ignoring temporary Covid-10 related changes. 8. During the year, Dan Davis, a single taxpayer, pays $2,200 of interest on a qualified student loan. Assume that Dan has adjusted gross income of $65,000. What student loan interest deduction may Dan claim on his Form 1040 for the year? A. $2,500 B. 2,200 C. 1,100 D. 0 E. None of the above 9. A contribution made to which of the listed entities is not deductible? A. Boy Scouts of America B. Oxford University, England C. Virginia Commonwealth University D. Society for the Prevention of Cruelty to Animals E. All of the above are deductiblearrow_forward
- Problem 13-47 (LO 13-3) Jackson invested $190,000 in a passive activity five years ago. On January 1, 2018, his at-risk amount in the activity was $45,000. His share of the income and losses in the activity were $52,000 loss in 2018, $20,000 loss in 2019, and $80,000 gain in 2020. Required: How much can Jackson deduct in 2018 and 2019?arrow_forwardProblem 14-76 (LO. 8, 9, 10) On May 2, 1990, Hannah Weather (Social Security number: 111-22-3333) acquired residential real estate for $450,000. Of the cost, $100,000 was allocated to the land and $350,000 to the building. On August 20, 2019, the building, which then had an adjusted basis of $0, was sold for $545,000 and the land for $200,000. If an amount is zero, enter "0". a. Determine the amount and character of the recognized gain from the sale of the building. There is a gain of $fill in the blank from the sale of the building, of which $fill in the blank is ordinary income due to § 1250 recapture. b. Determine the amount and character of the recognized gain from the sale of the land. The § 1231 gain from the sale of the land is $fill in the blank, of which $fill in the blank is subject to recapture.arrow_forwardProblem 10-61 (LO 10-2, LO 10-3) (Algo) Chaz Corporation has taxable income in 2020 of $361,000 for purposes of computing the §179 expense and acquired the following assets during the year: Placed in Asset Service Basis Office furniture September 12 $ 761,000 Computer equipment February 10 920,000 Delivery truck August 21 60,000 Qualified improvement property September 30 1,521,000 Total $ 3,262,000 What is the maximum total depreciation deduction that Chaz may deduct in 2020? (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round your intermediate calculations and final answer to the nearest whole dollar amount.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Current assets and current liabilities; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Jw4TaiP42P4;License: Standard youtube license