Multiple tax rates
• LO16–1, LO16–4, LO16–5
Case Development began operations in December 2018. When property is sold on an installment basis, Case recognizes installment income for financial reporting purposes in the year of the sale. For tax purposes, installment income is reported by the installment method. 2018 installment income was $600,000 and will be collected over the next three years. Scheduled collections and enacted tax rates for 2019–2021 are as follows:
2019 | $150,000 | 30% |
2020 | 250,000 | 40 |
2021 | 200,000 | 40 |
Pretax accounting income for 2018 was $810,000, which includes interest revenue of $10,000 from municipal bonds. The enacted tax rate for 2018 is 30%.
Required:
1. Assuming no differences between accounting income and taxable income other than those described above, prepare the appropriate
2. What is Case’s 2018 net income?
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Intermediate Accounting
- 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…arrow_forwardLO.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_forwardImmediate Accounting ll Ch 16 2. Arnold Industries has pretax accounting income of $56 million for the year ended December 31, 2024. The tax rate is 25%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2024. An $32 million advance rent payment at the inception of the lease is tax-deductible in 2024 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term. Required: Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024. Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and…arrow_forward
- Exercise 8-19 (LO. 2) Euclid acquires a 7-year class asset on May 9, 2020, for $80,000 (the only asset acquired during the year). Euclid does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. Click here to access the depreciation table to use for this problem. If required, round your answers to the nearest dollar. Calculate Euclid's cost recovery deduction for 2020 and 2021.2020: $2021: $ 8-7cCost Recovery Tables 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. Exhibit 8.4 Regular MACRS table for personalty. Depreciation method: 200 percent declining-balance switching to straight-line. Recovery periods: 3, 5, 7 years. Convention: mid-quarter. Exhibit 8.5 MACRS optional straight-line table for personalty.…arrow_forwardExercise 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_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 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000 Using the information above, what is the interest expense for 2019?2.A. None C. 330,000 B. 300,000 D. 630,000arrow_forwardRr.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_forwardProblem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000. How much should NOREEN INC record interest and retirement of its liability to MENDOZAINC on December 31, 2020?None C. 330,000; 3,630,000 300,000; 3,600,000 D. 630,000; 3,630,000arrow_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_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_forwardIntermediate 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_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT