Exam 6: Accounting for Income Taxes

A company had taxable income of $2 million in fiscal 2017 and paid taxes of .7 million; the company incurred a loss of $8 million in fiscal 2018 when the tax rate is 50%.How much refund is the company entitled to?

Explain why a company should carry back losses and why a company might choose to carry losses forward instead.

What is the accepted method of accounting for taxes under IFRS and ASPE? Accrual method or taxes payable method?

Indicate whether the item will result in a deductible temporary difference,taxable temporary difference or neither.

Which statement is correct about the "taxes payable method"?

At the beginning of the current fiscal year,Withering Corporation had a deferred income tax liability balance of $20,000,which relates to depreciable assets.During the year,Withering reported the following information: • Income before income taxes for the year was $300,000 and the tax rate was 45%. • Depreciation expense was $150,000 and CCA was $130,000. • Unearned rent revenue was reported at $120,000.Rent revenue is taxable when the cash is received.There was no opening balance in the unearned rent revenue account at the beginning of the year. • No other items affected deferred tax amounts other than these transactions. Required: Prepare the journal entry or entries to record income taxes for the year.

The following information relates to the accounting income for Ontario Uranium Enterprises (OUE)for the current year ended December 31. During the year,the company sold one of its machines with carrying value of $85,000 for proceeds of $10,000,resulting in an accounting loss of $75,000.This loss has been included in the pre-tax income figure of $850,000 shown above.For tax purposes,the proceeds from the disposal were removed from the undepreciated capital cost (VCC)of Class 8 assets. The deferred income tax liability account on January 1 had a credit balance of $230,000.This balance is entirely related to property,plant,and equipment (PPE). Required: Prepare the journal entries to record income taxes for OUE.

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%. Required: Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

Which statement is correct?

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

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

Under the accrual method,what is the effect of the tax rate change in FY2019?

A company has income before tax of $350,000,which includes a permanent difference of $65,000 relating to non-taxable dividend income.There are no other permanent or temporary differences.The income tax rate is 45%. Required: Compute the amount of taxes payable and income tax expense.

A company has a deferred tax liability of $20,000 at the beginning of the fiscal year relating to a taxable temporary difference of $80,000.The current year tax rate is 20%. Required: Provide the journal entry to reflect the tax rate change.

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 25%.

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Required: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

Which statement is correct?

What adjustment is required to the opening deferred taxes as a result of the rate change?

Which statement is correct?

In the first two years of operations,a company reports taxable income of $125,000 and $165,000,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%. Required: 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.