Exam 16: Accounting for Income Taxes

The following information relates to the accounting income for Saskatchewan Real Estate Company (SREC)for the current year ended December 31. During the year,the company sold one of its buildings with carrying value of $780,000 for proceeds of $1,000,000,resulting in an accounting gain of $220,000.This gain has been included in the pre-tax income figure of $670,000 shown above.For tax purposes,the acquisition cost of the building was $870,000.For purposes of CCA,it is a Class 1 Asset,which treats each building as a separate class.The undepreciated capital cost (UCC)on the building at the time of disposal was $660,000. Required: Prepare the journal entries to record income taxes for SREC.

Which statement is correct?

Which statement is accurate?

What is the tax expense under the deferral method for FY2018?

A company has income before tax of $200,000.The company also has a temporary difference of $80,000 relating to capital cost allowance (CCA)in excess of depreciation expense recorded for the year.There are no other permanent or temporary differences.The income tax rate is 40%. Required: Compute the amount of taxes payable and income tax expense.

Which of the following is an example of a "permanent difference"?

Which statement best describes the "deferral method"?

Which statement is correct?

Under the accrual method,what is the effect of the tax rate change in FY2016?

SEG Company reported $490,000 in income tax expense for the year under the accrual method.Its balance sheet reported an overall increase in deferred income tax liability of $20,000 and a decrease in income tax payable of $25,000.How much would SEG report as income tax expense had it used the taxes payable method?

The following information relates to the accounting income for Withering Press Company (WPC)for the current year ended December 31. The company had purchased land some years ago for $600,000.Recently,it was discovered that this land is contaminated by industrial pollution.Because of the soil remediation costs required,the value of the land has decreased.For tax purposes,the impairment loss is not currently deductible.In the future when the land is sold,half of any losses is deductible against taxable capital gains (ie. ,the other half that is not taxable or deductible is a permanent difference). The deferred income tax liability account on January 1 had a credit balance of $45,000.This balance is entirely related to property,plant,and equipment (PPE). Required: Prepare the journal entries to record income taxes for WPC.

Which method reflects the tax effect in the period that tax is payable?

Under the accrual method,what is the FY2017 tax expense before making any adjustments for deferred tax liabilities?

A company has a deferred tax liability of $112,500 at the beginning of the fiscal year relating to a taxable temporary difference of $450,000.The tax rate for the year increased from 25% to 35%. Required: Provide the journal entry to reflect the tax rate change.

What is the opening balance of the deferred tax liability account considering the rate change?

When will a terminal loss occur?

A company had taxable income of $2 million in fiscal 2017 and paid taxes of 0.6 million;the company incurred a loss of $7 million in fiscal 2018 when the tax rate is 50%.How much refund is the company entitled to?

How much tax expense would be recorded under the accrual method for FY2018?

What is a "taxable" temporary difference?

Under the accrual method,what is the tax expense in FY2017?