Exam 19: Accounting for Income Taxes

In 2015 Charmed,Inc.recorded book income of $370,000.The company's only temporary difference relates to a $60,000 installment sale that it recorded for book purposes; there are no permanent differences.Charmed anticipates receiving payments equally over the following three years.The current enacted tax rate in 2015 is 35%.The substantively enacted tax rates for the following three years are 30%,35%,and 38%,respectively. Under U.S.GAAP,what deferred tax amount should Charmed record for this temporary difference?

What should Greene Co.record as its federal income tax liability for 2015?

In 2015,the MoosePants Corporation reported income from continuing operations before taxes of $865,500 and income from discontinued operations of $213,000.MoosePants also reported $82,000 of unrealized gains from fair value accounting adjustments recorded as other comprehensive income.The company is subject to a 34% tax rate and reports no permanent differences. Prepare a partial income statement including comprehensive income.

Purrfect Pet Industries' income before taxes is $800,000 and its tax rate is 40%.Purrfect Pet included $50,000 of fully deductible inter-corporate dividends received in the $800,000.There are no other book-tax differences.What is the income tax liability for Purrfect Pet?

Caesar Corporation reported income before taxes of $200,000 for the years 2013,2014,and 2015.In 2016 they experienced a loss of $200,000.The company had a tax rate of 25% in 2013 and 2014,and a rate of 35% is 2015 and 2016.Assuming Caesar uses the carryback provisions for the net operating loss,by what amount will the income tax benefit reduce the net loss in 2016?

In 2015,its first year of operations,Moulin & Company experienced a $326,000 net operating loss and recorded a deferred tax asset of $117,360.Moulin decides that it is more likely than not that it will only be able to generate $250,000 of taxable income during the carryforward period.As a result,without generating additional future taxable income it will not be able to fully realize the NOL carryforward benefit. Prepare the necessary journal entry to record the net deferred tax asset in 2015.

S & C Inc.'s income tax payable is $270,000 and its tax rate is 40%.Assuming no book-tax income difference,what is S & C's net income?

TLR Productions has book income of $650,000,and a tax rate of 35%.Assuming there is no book-tax income difference,what is TLR's income tax expense?

Greene Co.reported a loss in 2015 of $595,000.The company reported taxable income of $183,000 in 2013 and $200,000 in 2014.It has no permanent or temporary differences and its tax rate is 40%.Greene reported taxable income of $287,000 in 2016.Prepare the necessary journal entries for 2015 and 2016.

Kramerica Corporation took an aggressive tax position in its current year's tax return,claiming a $370,000 deduction.The company reported $770,000 in taxable income before considering the tax deduction,and is subject to a 33% income tax rate.Tax authorities have challenged this type of tax deduction in the past and Kramerica is now concerned about the realizability of this tax deduction in the future.However,management believes that it is more likely than not that the firm will sustain the tax benefits upon examination by tax authorities.The company provides the following analysis regarding the probabilities of sustaining the tax deduction: Prepare the journal entry to record the current year's tax provision and the liability for the uncertain tax provision.

Temporary differences between the book and tax treatment of transactions create deferred tax assets or deferred tax liabilities.

Refer to Violet Corporation.Violet reported taxable income of $325,000 in 2016.What is the necessary journal entry for 2016?

Lyon Corp reported income from continuing operations before taxes of $774,000 and income from discontinued operations of $198,000.Lyon also reported $77,000 of unrealized gains from fair value accounting adjustments recorded as other comprehensive income.The company is subject to a 35% tax rate and reports no permanent differences. Prepare a partial income statement including comprehensive income.

Piper Inc.'s income before taxes is $550,000 and its tax rate is 40%.Piper included $30,000 of interest from municipal bonds in the $550,000.There are no other book-tax differences.Prepare the journal entry to record income tax expense and a reconciliation of the statutory tax rate to the effective tax rate.

Which of the following statements best describes the effective tax rate?

Explain the conflicting incentives that relate to reporting of taxes.What might the related strategies signal to investors?

The amount of income that a company reports on its tax return is know as ________.

Excluding potentially taxable income from a tax return is an example of an uncertain tax position.

Brown Inc.'s net income after taxes is $260,000 and its tax rate is 35%.Assuming no book-tax income difference,what is the journal entry to record income tax expense?

Tetra Corp,an IFRS reporter,has the deferred tax assets and liabilities presented below: What amount will the company report for the net current and non-current deferred taxes?