Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes (A+)

Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes.

For each item below, indicate whether it involves:

(1) A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset.

(2) A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability.

(3) A permanent difference.

Use the appropriate number to indicate your answer for each.

(a) The MACRS depreciation system is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes for some plant assets.

(b) A landlord collects some rents in advance. Rents received are taxable in the period when they are received.

(c) Expenses are incurred in obtaining tax-exempt income.

(d) Costs of guarantees and warranties are estimated and accrued for financial reporting purposes.

(e) Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.

(f) Interest is received on an investment in tax-exempt municipal obligations.

(g) For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes but the assets\’ lives are shorter for tax purposes.

(h) Proceeds are received from a life insurance company because of the death of a key officer. (The company carries a policy on key officers.)

(i) The tax return reports a deduction for 80% of the dividends received from U.S. corporations. The cost method is used in accounting for the related investments for financial reporting purposes.

(j) Estimated losses on pending lawsuits and claims are accrued for books. These losses are tax deductible in the period(s) when the related liabilities are settled.

(k) Expenses on stock options are accrued for financial reporting purposes.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Starfleet Corporation has one temporary difference at the end of 2012 (A+)

Starfleet Corporation has one temporary difference at the end of 2012 that will reverse and cause taxable amounts of $55,000 in 2013, $60,000 in 2014, and $75,000 in 2015. Starfleet\’s pretax financial income for 2012 is $400,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2012.

Required:

(a) Compute taxable income and income taxes payable for 2012.

(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2012.

(c) Prepare the income tax expense section of the income statement for 2012, beginning with the line \”Income before income taxes.\”

Click here for the SOLUTION

Posted in Homework Help | Comments Off

Rode Inc. incurred a net operating loss of $500,000 in 2012 (A+)

Rode Inc. incurred a net operating loss of $500,000 in 2012. Combined income for 2010 and 2011 was $350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

At December 31, 2012, Percheron Inc. had a deferred tax asset of $30,000 (A+)

At December 31, 2012, Percheron Inc. had a deferred tax asset of $30,000. At December 31, 2013, the deferred tax asset is $59,000. The corporation\’s 2013 current tax expense is $61,000. What amount should Percheron report as total 2013 tax expense?

Click here for the SOLUTION

Posted in Homework Help | Comments Off

At December 31, 2012, Apaloosa Corporation had a deferred tax liability of $25,000 (A+)

At December 31, 2012, Apaloosa Corporation had a deferred tax liability of $25,000. At December 31, 2013, the deferred tax liability is $42,000. The corporation\’s 2013 current tax expense is $48,000. What amount should Apaloosa report as total 2013 tax expense?

Click here for the SOLUTION

Posted in Homework Help | Comments Off

In 2012, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000 (A+)

In 2012, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to be reported as income taxes payable at December 31, 2012.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

2. On May 11, Smythe Co. accepts delivery of $30,000 of merchandise it purchases for resale from Hope Corporation (A+)

On May 11, Smythe Co. accepts delivery of $30,000 of merchandise it purchases for resale from Hope Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Hope $20,000. When the goods are delivered, Smythe pays $335 to Express Shipping for delivery charges on the merchandise. On May 12, Smythe returns $1,200 of goods to Hope, who receives them one day later and restores them to inventory. The returned goods had cost Hope $800. On May 20, Smythe mails a check to Hope Corporation for the amount owed. Hope receives it the following day. (Both Smythe and Hope use a perpetual inventory system.)

1. Prepare journal entries that Smythe Co. records for these transactions.

2. Prepare journal entries that Hope Corporation records for these transactions

Click here for the SOLUTION

Posted in Homework Help | Comments Off

On May 11, Smythe Co. accepts delivery of $30,000 of merchandise it purchases for resale from Hope Corporation (A+)

On May 11, Smythe Co. accepts delivery of $30,000 of merchandise it purchases for resale from Hope Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Hope $20,000. When the goods are delivered, Smythe pays $335 to Express Shipping for delivery charges on the merchandise. On May 12, Smythe returns $1,200 of goods to Hope, who receives them one day later and restores them to inventory. The returned goods had cost Hope $800. On May 20, Smythe mails a check to Hope Corporation for the amount owed. Hope receives it the following day.

Required:

1 Prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used by both the buyer and the seller.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

L’Oreal reports the following income statement accounts for the year ended December 31, 2009 (A+)

L’Oreal reports the following income statement accounts for the year ended December 31, 2009

Net profit €1,794.9 Income tax expense €676.1

Finance costs 76.0 Profit before tax expense 2,471.0

Net sales 17,472.6 Research and development expense 609.2

Gross profit 12,311.0 Selling, general and administrative expense 3,735.5

Other expense 30.6 Advertising and promotion expense 5,388.7

Cost of sales 5,161.6

Required:

1 Following the usual IFRS practices, prepare the income statement for the year ended December 31, 2009.

Click here for the SOLUTION

Posted in Homework Help | Comments Off

2. Taos Company purchased merchandise for resale from Tuscon Company (A+)

Taos Company purchased merchandise for resale from Tuscon Company with an invoice price of $22,000 and credit terms of 3/10, n/60. The merchandise had cost Tuscon $15,000. Taos paid within the discount period.

Required:

1 Prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used by both the buyer and the seller.

Click here for the SOLUTION

Posted in Homework Help | Comments Off