Exam 16: Accounting for Income Taxes

What is the deferred tax liability under the deferral method for F2015? F2013 F2014 F2015 Income before tax 120,000 110,000 150,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 35\%

Withering Inc.began operations in 2011.Due to the untimely death of its founder,Edwin Delaney,the company was wound up in 2013.The following table provides information on Withering's income over the three years. 2011 2012 2013 Income before tax 5,000 95,000 87,000 Taxable income nil 90,000 97,000 The statutory income tax rate remained at 45% throughout the three years. Requirement: a.For each year and for the three years combined,compute the following: - income tax expense under the taxes payable method; - the effective tax rate (= tax expense -;- pre-tax income)under the taxes payable method; - income tax expense under the accrual method; - effective tax rate under the accrual method. b.Briefly comment on any differences between the effective tax rates and the statutory rate of 45%.

What is the deferred tax liability under the deferral method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Sales revenue 4,600,000 Dividend revenue (not taxable) 120,000 Operating expenses other than depreciation (3,220,000) Depreciation Income before tax Capital cost allowance claimed 600,000 Income taxpate 35\% Requirement: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 20%. Requirement: Provide the journal entry to reflect the tax rate change.

Which accurately describes the purpose of the taxes payable method?

In the first year of operations,a company reports taxable income of $125,000 and paid $31,250 of income taxes.It is now the end of the second year,and the company has a loss of $175,000 for tax purposes.The company's management believes it is probable the company will be able to use up its tax losses.The tax rate is currently 40%. Requirement: Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

What is the tax expense under the deferral method for F2013? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

How much tax expense would be recorded under the accrual method for F2015? F2014 F2015 Deferred tax liability 27,500 Revenue 150,000 Taxable income 105,000 Tax rate 25\% 35\%

Which statement is accurate?

In the first two years of operations,a company reports taxable income of $125,000 and $65,000,respectively.In the first two years,the tax rates were 44% and 48% respectively.It is now the end of the third year,and the company has a loss of $260,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 25%. Requirement: a.How much tax was paid in year 1 and year 2? b.Compute the amount of income tax payable or receivable in the current (third)year.

How much tax would be reported under the taxes payable method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

What adjustment is required to the opening deferred taxes as a result of the rate change? Opening deductible (taxable) temporary differences (400,000) Current year deductible (taxable) temporary (100,000) differences Tax rate (prior year) 40\% Tax rate (current year) 30\%

Indicate whether the item will result in a deductible temporary difference,taxable temporary difference or neither. Deductible Taxable Neither temporary temporary item difference difference Rent revenue collected in advance that is taxable in the year received CCA that exceeds depreciation expense for property, plant, and equipment Membership dues that are not deductible Percentage of completion income that is taxable only once the contract is complete Dividends received that are not taxable

The following data represent the differences between accounting and tax income for Seafood Imports Inc.,whose pre-tax accounting income is $650,000 for the year ended December 31.The company's income tax rate is 45%.Additional information relevant to income taxes includes the following. a.Capital cost allowance of $270,000 exceeded accounting depreciation expense of $160,000 in the current year. b.Rents of $25,000,applicable to next year,had been collected in December and deferred for financial statement purposes but are taxable in the year received. c.In a previous year,the company established a provision for product warranty expense.A summary of the current year's transactions appears below: i. Provision for warranties, January 1 balance ii. 101,000 ii. Provision for the year iv. 42,500 iii. Payments made to fulfill product warranties vi. (33,000) iv. Provision for warranties, December 31 balance viii. 110,500 For tax purposes,only actual amounts paid for warranties are deductible. d.Insurance expense to cover the company's executive officers was $6,800 for the year,and you have determined that this expense is not deductible for tax purposes. Requirement: Prepare the journal entries to record income taxes for Seafood Imports.

Which statement is correct?

In the first two years of operations,a company reports taxable income of $125,000 and $65,000,respectively.In the first two years,the company paid $50,000 and $13,000.It is now the end of the third year,and the company has a loss of $160,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 25%. Requirement: Compute the amount of income tax payable or receivable in the current (third)year.

Under the accrual method,what is the tax expense in F2014? F2013 F2014 F2015 Deferred tax liability 27,000 Revenue 100,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

How much tax expense would be recorded under the accrual method for F2014? F2013 F2014 F2015 Deferred tax liability 30,000 Revenue 130,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

In the first two years of operations,a company reports taxable income of $115,000 and $165,000,respectively.In the first two years,the tax rates were 38% and 32% respectively.It is now the end of the third year,and the company has a loss of$160,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 25%. Requirement: a.How much tax was paid in year 1 and year 2? b.Compute the amount of income tax payable or receivable in the current (third)year.