Exam 17: Accounting for Income Taxes

ASC 740 deals with accounting for uncertain tax positions.

Lafayette, Incorporated, completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000. The $50,000 book-tax difference results from a disallowed deduction forbusiness-related meals. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Prepare the journal entries to record the deferred tax provision and the valuation allowance.

Marlin Corporation reported pretax book income of $1,007,000. During the current year, the net reserve for warranties increased by $26,400. In addition, book depreciation exceeded tax depreciation by $100,700. Finally, Marlin subtracted a dividends received deduction of $15,700 in computing its current-year taxable income. Marlin's current income tax expense or benefit would be:

Lafayette, Incorporated, completed its first year of operations with a pretax loss of $807,600. The tax return showed a net operating loss of $765,200. The $42,400 book-tax difference results from a disallowed deduction for business-related meals. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Prepare the journal entries to record the deferred tax provision and the valuation allowance.

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34 percent). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21 percent. Robinson's deferred income tax expense or benefit for the current year would be: