Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Textbook Question
Chapter 18, Problem 12E
Temporary and Permanent Differences Lin has just completed its first year of operations and has a number of differences between its pretax financial income and taxable income. The differences at the end of 2019 are as follows:
- a. Lin recorded $7,000 of interest revenue on municipal bonds during 2019.
- b. $15,000 of accrual-basis sales were recognized in income during 2019. They are expected to be received in cash during January 2020.
- c.
Depreciation on machinery totaled $28,000 using straight-line depreciation for financial statements. Lin’s tax accountant recorded $36,000 of depreciation on the company’s tax return. - d. Lin was fined $3,000 for violating certain labor laws during 2019. Lin paid the fine during 2019 and agreed to ensure future violations would not occur.
- e. Bryant Corporation has agreed to rent space from Lin in 2020. In December 2019, Lin received $7,500 from Bryant in advance for rent.
- f. For 2019, Lin reported $9,500 of warranty expense on its income statement. The company’s warranty liability at the end of 2019 was $6,250. Lin expects additional warranty costs to be paid during 2020.
Required:
- 1. For each item, determine if it results in a temporary or permanent difference. If the item results in a temporary difference, determine if it results in a
deferred tax asset ordeferred tax liability. - 2. For each item, determine if it initially results in pretax financial income being greater than or less than taxable income.
- 3. Next Level Discuss why permanent differences do not impact future periods’ taxable income and how these differences affect tax rates.
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The following information relates to Wildhorse Corp.:
At July 1, 2019
At June 30, 2020
Temporary difference, giving rise to future taxable amounts
$28,600
$79,800
Temporary difference, giving rise to future deductible amounts
18,700
54,800
Accounting income for the year ended June 30, 2020 was $70,200. No permanent differences existed during the fiscal year. The
company was expected to operate profitably in the future. The tax rate was 20% for the current and future years. Wildhorse Corp.
follows ASPE.
Calculate the amount of taxable income for 2020.
Taxable Income
$
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List of Accounts
ABC Company reported pretax financial income of 7,000,000 for the year ended December 31,2021. The taxable income was 6,500,000.
The differences is due to accelerated depreciation for income tax purposes.
The income tax rate is 25% and ABC Company made estimated tax payment of 500,000 during the current year.
REQUIREMENTS:
a. Prepare journal entries for 2021.
b. Compute the total income tax expenses for 2021
a. The balance in Deferred Inflows-Property Taxes was $48,000 at the end of the previous year. This was recognized as revenue in
the current year in a reversing journal entry.
b. On July 1, 2019, property taxes in the amount of $8,200,000 were levied. It was estimated that 0.5 percent would be uncollectible.
The property taxes were intended to finance the expenditures for the year ended June 30, 2020.
e collected.
c. October 31, $4,200,000 in property taxes
d. December 31, $3,700,000 in additional property taxes were collected.
e. Receivables totaling $8,700 were deemed to be uncollectible and written off.
f. On June 30, $37,000 was moved from Revenues Control to Deferred Inflows, because it was not expected to be collected within 60
days.
Prepare journal entries for each of the dates as indicated. (If no entry is required for a transaction/event, select "No Journal Entry
Required" in the first account field.)
View transaction list
Journal entry worksheet
Chapter 18 Solutions
Intermediate Accounting: Reporting And Analysis
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Ch. 18 - Prob. 11GICh. 18 - Prob. 12GICh. 18 - Prob. 13GICh. 18 - Prob. 14GICh. 18 - Prob. 15GICh. 18 - Describe an operating loss carryforward. List the...Ch. 18 - Prob. 17GICh. 18 - Prob. 18GICh. 18 - Prob. 19GICh. 18 - Prob. 20GICh. 18 - Prob. 21GICh. 18 - Prob. 22GICh. 18 - Prob. 23GICh. 18 - Which of the following is not a cause of a...Ch. 18 - Which of the following is an argument in favor of...Ch. 18 - Prob. 3MCCh. 18 - Prior to and during 2019, Shadrach Company...Ch. 18 - At the beginning of 2019, Conley Company purchased...Ch. 18 - Oliver Company earned taxable income of 7,500...Ch. 18 - Prob. 7MCCh. 18 - Prob. 8MCCh. 18 - Brooks Company reported a prior period adjustment...Ch. 18 - Which component of current income is not disclosed...Ch. 18 - Parker Company identifies depreciation as the only...Ch. 18 - Refer to RE18-1. Assume that Parkers taxable...Ch. 18 - In the current year, Madison Corporation had...Ch. 18 - Refer to RE18-3. Prepare the additional journal...Ch. 18 - Turnip Company purchased an asset at a cost of...Ch. 18 - Prob. 6RECh. 18 - Compute Radish Companys taxable income given the...Ch. 18 - Sky Company reports a pretax operating loss of...Ch. 18 - Prob. 9RECh. 18 - Kline Company has the following items of pretax...Ch. 18 - Barth James Inc. has the following deferred tax...Ch. 18 - Cole Company had a deferred tax liability of 1,000...Ch. 18 - Future Taxable Amount Arrow Company began...Ch. 18 - Change in Tax Rates At the end of 2019, Sentry...Ch. 18 - Temporary Difference At the end of 2019, its first...Ch. 18 - Single Temporary Difference: Multiple Rates At the...Ch. 18 - Prob. 5ECh. 18 - Valuation Account At the end of 2019, its first...Ch. 18 - Deferred Tax Asset and Valuation Account Zeta...Ch. 18 - Incomc Taxes Then Company has been in operation...Ch. 18 - Prob. 9ECh. 18 - Multiple Temporary Differences Vickers Company...Ch. 18 - Multiple Tax Rates For the year ended December 31,...Ch. 18 - Temporary and Permanent Differences Lin has just...Ch. 18 - Temporary and Permanent Differences Assume the...Ch. 18 - Operating Loss At the end of 2019, Keil Company...Ch. 18 - Operating Loss At the end of 2019, its first year...Ch. 18 - Operating Loss Baxter Company began operations in...Ch. 18 - Intraperiod Tax Allocation Wright Company reports...Ch. 18 - Prob. 18ECh. 18 - Prob. 19ECh. 18 - Balance Sheet Presentation Thiel Company reports...Ch. 18 - Uncertain Tax Position At the end of the current...Ch. 18 - Definitions The FASB has defined several terms in...Ch. 18 - Temporary and Permanent Differences In the current...Ch. 18 - Multiple Temporary Differences Wilcox Company has...Ch. 18 - Interperiod Tax Allocation Klerk Company had four...Ch. 18 - Prob. 5PCh. 18 - Interperiod Tax Allocation Quick Company reports...Ch. 18 - Deferred Tax Liability: Depreciation At the...Ch. 18 - Deferred Tax Liability: Depreciation Gire Company...Ch. 18 - Interperiod Tax Allocation Peterson Company has...Ch. 18 - Operating Loss Ross Company has been in business...Ch. 18 - Prob. 11PCh. 18 - Comprehensive Colt Company reports pretax...Ch. 18 - Prob. 13PCh. 18 - Comprehensive Jayryan Company sells products in a...Ch. 18 - Prob. 1CCh. 18 - Prob. 2CCh. 18 - Prob. 3CCh. 18 - Interperiod and Intraperiod Tax Allocation Income...Ch. 18 - Prob. 5CCh. 18 - Intel-period Tax Allocation Chris Green, CPA, is...Ch. 18 - Prob. 7CCh. 18 - Analyzing Coca-Colas Income Tax Disclosures Obtain...Ch. 18 - Prob. 9C
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