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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Balance Sheet Reporting and Tax Rate Change At the end of 2018, Duff Company prepared the following; schedule of its deferred tax items (based on the currently enacted tax rate of 30%):

Chapter 18, Problem 11P, Balance Sheet Reporting and Tax Rate Change At the end of 2018, Duff Company prepared the following;

On April 30, 2019, Congress changed the income tax rate to 40% for 2019 and future years. At the end of 2019, Duff reported taxable income of $62,500. At that time, Dolf determined that its deferred tax items should have balances as follows at the end of 2019 (based on the 40% tax rate): #1, $10,700 debit; #2, $15,000 debit; #3, $7,000 credit; #4, $25,900 credit.

Required:

  1. 1. Show how the deferred tax items are reported on Duffs December 31, 2018, balance sheet.
  2. 2. Prepare the April 30, 2019, journal entry to correct Duff’s deferred tax items.
  3. 3. Prepare Dolf’s income tax journal entry at the end of 2019.
  4. 4. Show how the current and deferred tax items are reported on Duff’s December 31, 2019, balance sheet.
  5. 5. Calculate the total income tax expense for 2019.

1.

To determine

Explain the manner of reporting deferred tax items in the balance sheet of Company D as on December 31, 2018.

Explanation

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare balance sheet of Company D as on December 31, 2018:

Company D
Balance sheet (partial)
As on December 31, 2018
AssetsAmount
Current liabilities: 
  
Non- Current liabilities: 
Deferred tax liability (net) (1)$4,80...

2.

To determine

Prepare journal entry to rectify the deferred tax item of Company D.

3.

To determine

Record the income tax entry for Company D.

4.

To determine

Explain the manner of reporting income tax disclosures in the balance sheet of Company D.

5.

To determine

Determine the total income tax expense for 2019.

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