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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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Interperiod and Intraperiod Tax Allocation

Income tax allocation is an integral part of generally accepted accounting principles. Income tax allocation consists of both intraperiod and inter-period tax allocation.

Required:

  1. 1. Explain the difference between interperiod and intraperiod income tax allocation.
  2. 2. Explain how a corporation discloses its income tax expense (or credit) for the year under intraperiod allocation.
  3. 3. Provide an example of intraperiod tax allocation on a corporation’s income statement that includes income from continuing operations, a loss from the sale of a discontinued component, and a gain from the operations of the discontinued. Assume a 30% tax rate.

1.

To determine

Describe the difference between inter period tax allocation and intra period tax allocation.

Explanation

Intra period tax allocation: Every business firm report their income from continuing operation and discontinued operation separately in financial statement for better understanding about the operation of business. So, for the tax purpose, a business should divide the total income tax expense for a reporting period between continuing and discontinued operations. A gain from discontinued operation increase the taxable income while loss from discontinued reduce the taxable income and produce a tax benefit...

2.

To determine

Explain the manner of disclosing the income tax expense (credit) by a company for the year under intra period allocation.

3.

To determine

Cite an example of intra period tax allocation on a corporation’s income statement that includes income from continuing operations, a loss from the sale of a discontinued component, and a gain from the operations of the discontinued assuming a tax rate of 30%.

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