110. Baltimore Corporation purchases a new machine for $50,000 on January 1, 2008. The machine has a
four-year estimated service life and an estimated salvage value of zero. After paying the cost of running and
maintaining the machine, the firm enjoys a $25,000-per-year excess of revenues over expenses (except
depreciation and taxes). In addition to the $25,000 from the machine, other pre-tax income each year is $35,000.
Baltimore uses straight-line depreciation for financial reporting and depreciates the machine for tax reporting
using the following percentages: 33% in the first year, 44% in the second, 15% in the third, and 8% in the
fourth. Depreciation is Baltimore’s only temporary difference. Baltimore pays combined federal and local
income taxes at a rate of 40% of taxable income.
a. Compute the amount of income taxes currently payable for each of the four years.
b. Compute the carrying value of the machine for financial reporting and the tax basis of the machine for tax
reporting at the end of each of the four years. The tax basis is the amortized cost for income tax purposes.
c. Compute the amount of income tax expense for each of the four years.
d. Give the journal entries to record income tax expense and income tax payable for 2008 through 2011.
111. What is off-balance-sheet financing? How are they structured? How are they treated under U.S. GAAP
and IFRS.
112. Describe the accounting for pension plan benefits.
RETIREMENT BENEFITS
113. Describe the accounting for employer sponsored defined benefit pension plans.
EMPLOYER (SPONSOR) ACCOUNTING FOR A DEFINED BENEFIT PENSION PLAN
114. Discuss the interpretation of retirement benefit disclosures.
INTERPRETING RETIREMENT BENEFIT DISCLOSURES
115. Describe the accounting for income taxes for financial reporting purposes.
INCOME TAXES
116. Describe the complexities of permanent and temporary differences on the financial reporting requirements
for income taxes.
FINANCIAL REPORTING REQUIREMENTS FOR INCOME TAXES
117. Discuss the accounting for income taxes and the disclosure of income taxes in the financial statements.
ACCOUNTING FOR INCOME TAXES