Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 17, Problem 17.1P
a.
To determine
Balance of deferred tax account at the end of each year.
b.
To determine
Toprepare:
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Statement 1: Permanent differences result in deferred tax assets and deferred tax liabilities. Statement 2: Deferred tax assets should be reported as current if these will reverse in the next twelve months. Statement 3: If the carrying amount of an asset is higher than the tax base, the difference will result in deferred tax liability. Statement 4: Operating loss carryforward occurs when an entity has a negative taxable income. Statement 5: Rent collected in advance shall be taxable when earned.
Which of the statement/s are false?
for each has Ashley listed below indicate whether that item is a permanent difference or temporary difference. For transactions identified as temporary differences indicate whether they will create a deferred tax asset or a different tax liability. Choose from the following options:
Type of difference: temporary, permanent
Deffered Tax Classification: DTA, DTL, neither
Advance rental receipts
estimated future warranty costs
installment sales
excess tax depreciation over book depreciation
long-term construction contracts
premiums paid on life insurance of officers
a.) For the current year temporary differences existed between the financial statement carrying amounts and the tax basis of the following:
Carrying Amount
Tax Basis
Future Taxable or(Deductible)Amount
Buildings andequipment
$
50,000,000
$
36,000,000
$
14,000,000
Prepaid insurance
3,000,000
0
3,000,000
Liability-losscontingency
12,000,000
0
(12,000,000
)
(b.) No temporary differences existed at the beginning of the year.
(c.) Pretax accounting income was $200,000,000 and taxable income was $110,000,000 for the year and the tax rate is 40%. Permanent differences are the cause of any difference between pretax accounting income and taxable income that are not due to temporary differences.
Required:Prepare the journal entry to record the tax provision for the current year.
Chapter 17 Solutions
Intermediate Accounting (2nd Edition)
Ch. 17 - Prob. 17.1QCh. 17 - When will income tax expense and income taxes...Ch. 17 - Will permanent differences cause the effective tax...Ch. 17 - When do permanent differences arise?Ch. 17 - How are deferred tax assets and deferred tax...Ch. 17 - Prob. 17.6QCh. 17 - Prob. 17.7QCh. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - How does a firm determine the need for a valuation...
Ch. 17 - Prob. 17.11QCh. 17 - Prob. 17.12QCh. 17 - Prob. 17.13QCh. 17 - How does an entity account for uncertain tax...Ch. 17 - Prob. 17.15QCh. 17 - Prob. 17.16QCh. 17 - Do U.S. GAAP and IFRS classify deferred tax...Ch. 17 - Prob. 17.18QCh. 17 - Cavan Company prepared the following...Ch. 17 - Prob. 17.2MCCh. 17 - Prob. 17.3MCCh. 17 - Prob. 17.4MCCh. 17 - Prob. 17.5MCCh. 17 - Prob. 17.6MCCh. 17 - Prob. 17.7MCCh. 17 - Prob. 17.1BECh. 17 - Income Taxes Payable. Limmox Company has...Ch. 17 - Permanent Differences. Simmox Company's income...Ch. 17 - Permanent Differences. Plimmox Company's income...Ch. 17 - Permanent Differences, Reconciliation of Statutory...Ch. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Temporary Differences, Deferred Tax Liability....Ch. 17 - Temporary Differences. Deferred Tax Asset....Ch. 17 - Temporary Differences, Deferred Tax Asset. Using...Ch. 17 - Prob. 17.14BECh. 17 - Realizability of Deferred Assets. Maves, Inc....Ch. 17 - Prob. 17.16BECh. 17 - Change in Tax Rates. Finer Shoes Company recorded...Ch. 17 - Change in Tax Rates, IFRS. Use the same...Ch. 17 - Prob. 17.19BECh. 17 - Prob. 17.20BECh. 17 - Prob. 17.21BECh. 17 - Prob. 17.22BECh. 17 - Prob. 17.23BECh. 17 - Prob. 17.24BECh. 17 - Prob. 17.25BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Change in Tax Rates, Permanent Difference,...Ch. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - Net Operating Loss, Carryback. Phlash Photo Labs,...Ch. 17 - Net Operating Loss, Carryforward. Loggins Lumber...Ch. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Net Operating Loss, Carryforward, Tax Rate Change....Ch. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Uncertain Tax Positions. Lewis Eagle Corporation...Ch. 17 - Uncertain Tax Positions. Based on the information...Ch. 17 - Prob. 17.1PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Temporary Differences, Deferred Tax Liabilities....Ch. 17 - Prob. 17.4PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.6PCh. 17 - Net Operating Loss, Carryback, Carryforward,...Ch. 17 - Prob. 17.8PCh. 17 - Net Operating Loss, Carryback. Carryforward. CPF...Ch. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Permanent Differences, Temporary Tax Differences,...Ch. 17 - Prob. 1JCCh. 17 - Prob. 2JCCh. 17 - Prob. 1FSCCh. 17 - Prob. 1SSCCh. 17 - Prob. 2SSCCh. 17 - Prob. 3SSCCh. 17 - Scene 1: The concept of the deferred tax liability...Ch. 17 - Basis for Conclusions Case 2: Uncertain Tax...
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- Temporary and Permanent Differences In the current year, you are calculating a diversified companys deferred taxes. Based on an analysis of the companys current taxable income and pretax financial income, you have identified the following items that create differences between the two amounts and that may result in differences between the companys future taxable income and its nature pretax financial income: Required: For each difference, indicate whether it is a temporary difference (T) or a permanent difference (P) by placing the appropriate letter on the line provided. If the difference is a temporary difference, also indicate for the current year whether it will result in a future taxable amount (FT) or a future deductible amount (FD).arrow_forwardDeferred Tax Assets. Components of the deferred tax asset of Biosante Pharmaceuticals, Inc., are shown in Exhibit 2.14. The company had no deferred tax liabilities. REQUIRED a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwards. (Net operating loss carryforwards [also referred to as tax loss carryforwards] are amounts reported as taxable losses on tax filings. Because the tax authorities generally do not pay corporations for incurring losses, companies are allowed to carry forward taxable losses to future years to offset taxable income. These future tax benefits give rise to deferred tax assets.) As of the end of 2008, what is the dollar amount of the companys net operating loss carryforwards? What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? Describe how these two amounts are related. b. Biosante has gross deferred tax assets of 28,946,363. However, the net deferred tax assets balance is zero. Explain. c. The valuation allowance for the deferred tax asset increased from 21,818,084 to 28,946,363 between 2007 and 2008. How did this change affect the company's net income?arrow_forwardDefinitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively 3. Temporary difference that results in taxable amounts in future years when the related asset or liability is recovered or settled, respectively 4. The future effects on income taxes, as measured by the applicable enacted tax rate and provisions of the enacted tax low, resulting from temporary differences and operating loss carryforwards at the end of the current year 5. The change during the year in a corporations deferred tax liabilities and assets 6. The deferred tax consequences of future taxable amounts 7. The portion of o deferred tax asset for which it is more likely than not that a tax benefit will not be realized 8. Temporary difference that results in deductible amounts in future years when the related asset or liability is recovered or settled, respectively 9. The sum of income tax payable and deferred tax expense (or benefit) 10. The amount of income taxes paid or payable (or refundable) for the current year 11. An excess of tax deductible expenses over taxable revenues in a year that may be carried forward to reduce taxable income in a future year 12. The excess of taxable revenues over tax deductible expenses and exemptions for the year 13. Income tax expense divided by income before income taxesarrow_forward
- (Two Differences, No Beginning Deferred Taxes, Multiple Rates) Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2016. Book Basis Tax Basis Equipment (net) $400,000 $340,000 Estimated warranty liability $200,000 $ –0– It is estimated that the warranty liability will be settled in 2017. The difference in equipment (net) will result in taxable amounts of $20,000 in 2017, $30,000 in 2018, and $10,000 in 2019. The company has taxable income of $520,000 in 2016. As of the beginning of 2016, the enacted tax rate is 34% for 2016–2018, and 30% for 2019. Hatcher expects to report taxable income through 2019.Instructions(a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016.(b) Indicate how deferred income taxes will be reported on the balance sheet at the end of 2016.arrow_forward(One Difference, Multiple Rates, Effect of Beginning Balance versus No Beginning Deferred Taxes) At the end of 2016, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting the following future taxable amounts. 2017 $ 60,000 2018 50,000 2019 40,000 2020 30,000 $180,000 Tax rates enacted as of the beginning of 2015 are: 2015 and 2016 40% 2017 and 2018 30% 2019 and later 25% McEvil’s taxable income for 2016 is $320,000. Taxable income is expected in all future years.Instructions(a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there were no deferred taxes at the end of 2015.(b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2015.arrow_forward(Two Differences, No Beginning Deferred Taxes, Multiple Rates) Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2024. Book Basis Tax Basis Equipment (net) $400,000 $340,000 Estimated warranty liability 200,000 –0– It is estimated that the warranty liability will be settled in 2025. The difference in equipment (net) will result in taxable amounts of $20,000 in 2025, $30,000 in 2026, and $10,000 in 2027. The company has taxable income of $520,000 in 2024. As of the beginning of 2024, the enacted tax rate is 34% for 2024–2026, and 30% for 2027. Hatcher expects to report taxable income through 2027. Instructions Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2024. Indicate how deferred income taxes will be reported on the balance sheet at the end of 2024.arrow_forward
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