Concept explainers
• LO16–1, LO16–5
Bronson Industries reported a
Required:
Determine the effect of the change and prepare the appropriate
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Intermediate Accounting
- Exercise 19.8 (Two Temporary Differences, One rate, 3 years). Button Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax Financial Income $840,000 $910,000 $945,000 Excess Depreciation Expense on tax Return (30,000) (40,000) (10,000) Excess Warranty Expense in Financial Income 20,000 10,000 8,000 Taxable Income $830,000 $880,000 $943,000 The income tax rate is 20% for all years. Instructions: a) Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020,2021, and 2022. b) Indicate how deferred taxes will be reported on the 2022 balance sheet. Button’s product warranty is for 12 months. Deferred tax asset ( $ 0 + $ 0 + $ 0 )..............................$ 0 Deferred tax liability ( $ 0 + $ 0 + $ 0…arrow_forwardThe FICA Tax (LO 9.3) (COVID provisions) Yeet Inc. has 14 employees in 2020. Yeet’s 2020 second quarter business was 70 percent lower than 2019 due to COVID-related impacts. Yeet was able to stay in business and kept ten of the fourteen employees working and paid each of them $8,000 in the quarter. In a effort to show solidarity, Yeet paid the four nonworking employees the same amount also. Yeet did not take a PPP loan. Yeet will take an employee retention credit for: a.70 percent of the wages paid to all fourteen employees. b.50 percent of the wages paid to all fourteen employees, whether working or not. c.100 percent of the wages paid to the four nonworking employees. d.50 percent of the wages paid to the four nonworking employees. e.70 percent of the ten working employees.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
- 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?arrow_forward4:34 PMJ-Matt, Inc., had pretax accounting income of $291,000 and taxable income of $300,000 in 2021. The only dif-ference between accounting and taxable income is estimated product warranty costs of $9,000 for sales in 2021. Warranty payments are expected to be in equal amounts over the next three years (2022-2024) and will be tax deductible at that time. Recent tax legislation will change the tax rate from the current 25% to 20% in 2023. Deter-mine the amounts necessary to record J-Matt's income taxes for 2021 and prepare the appropriate journal entry.arrow_forwardExercise 13-37 (LO. 7) On June 5, 2020, Brown, Inc., a calendar year taxpayer, receives cash of $750,000 from the county upon condemnation of its warehouse building (adjusted basis of $500,000 and fair market value of $750,000). Complete the statements below regarding what must Brown do to qualify for § 1033 postponement if the adjusted basis was instead $795,000. Because Brown has a realized loss on the condemnation of business property, it is automatically recognized . In this case, §1033 does not modify the normal rules of recognition. Therefore, Brown has a realized loss of $fill in the blank of which $fill in the blank is recognized. Feedbackarrow_forward
- 4 continue.... Sunland Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax financial income $842,000 $956,000 $914,000 Excess depreciation expense on tax return (28,800 ) (39,300 ) (9,900 ) Excess warranty expense in financial income 20,400 9,500 7,600 Taxable income $833,600 $926,200 $911,700 The income tax rate for all years is 20%. (b) Indicate how deferred taxes will be reported on the 2022 balance sheet. Sunland’s product warranty is for 12 months. Sunland CompanyBalance Sheet (Partial) $ Save for Later Attempts: 0 of 1 used Submit Answer (c) The parts of this…arrow_forwardAP_Chpt#5_4 As of June 30, 2020 (the computation date for the 2021 tax rate), Sanchez Company had a negative balance of $1,050 in its unemployment reserve account in State A. The company's average payroll over the last three 12-month periods amounted to $530,000. The unemployment compensation law of State A provides that the tax rate of an employer who has a negative balance on the computation date shall be 7.2% during the following calendar year. Using the tax rate schedule presented below, compute the following: Reserve Ratio Contribution Rate 0.0% or more, but less than 1.0% 6.7% 1.0% or more, but less than 1.2% 6.4% 1.2% or more, but less than 1.4% 6.1% 1.4% or more, but less than 1.6% 5.8% 1.6% or more, but less than 1.8% 5.5% 1.8% or more, but less than 2.0% 5.2% 2.0% or more, but less than 2.2% 4.9% 2.2% or more, but less than 2.4% 4.6% 2.4% or more, but less than 2.6% 4.3% 2.6% or more, but less than 2.8% 4.0% 2.8% or more, but less than 3.0% 3.7%…arrow_forwardBE19.2 (LO 1) Oxford Corporation began operations in 2020 and reported pretax financial income of $225,000 for the year. Oxford's tax depreciation exceeded its book depreciation by $40,000. Oxford's tax rate for 2020 and years thereafter is 30%. In its December 31, 2020, balance sheet, what amount of deferred tax liability should be reported? BE19.3 (LO 1, 2) Using the information from BE19.2, assume this is the only difference between Oxford's pretax financial income and taxable income. Prepare the journal entry to record the income tax expense, deferred income taxes, and income taxes payable, and show how the deferred tax liability will be classified on the December 31, 2020, balance sheet.arrow_forward
- 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 10arrow_forward4. Sunland Company has the following two temporary differences between its income tax expense and income taxes payable. 2020 2021 2022 Pretax financial income $842,000 $956,000 $914,000 Excess depreciation expense on tax return (28,800 ) (39,300 ) (9,900 ) Excess warranty expense in financial income 20,400 9,500 7,600 Taxable income $833,600 $926,200 $911,700 The income tax rate for all years is 20%. (a) Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit 2020…arrow_forwardPR.05.15 Since the SUTA rates changes are made at the end of each year, the available 2019 rates were used for FUTA and SUTA. Note: For this textbook edition the rate 0.6% was used for the net FUTA tax rate for employers. Example 5-10 Karlson Software Company is located in State H, which enables employers to reduce their contribution rates under the experience-rating system. From 2006 to 2015, inclusive, the company's total contributions to state unemployment compensation amounted to $14,665. For the calendar years 2016 to 2019, inclusive, the contribution rate for Karlson was 2.7%. The contributions of each employer are credited to an account maintained by the State Unemployment Compensation Commission. This account is credited with contributions paid into the account by the employer and is charged with unemployment benefits that are paid from the account. Starting January 1, 2020, the contributions rate for all employers in State H will be based on the following tax rate schedule:…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT