Accounting Chapter 16 Homework Straight-line depreciation for financial reporting

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subject Pages 14
subject Words 2447
subject Authors David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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Exercise 1620 (concluded)
Requirement 2
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1642 Intermediate Accounting, 8/e
Exercise 1621
Requirement 1
($ in thousands)
Current
Prior Years Year
2014 2015 2016
Net operating loss (100)
Requirement 2
($ in thousands)
Operating loss before income taxes $(100)
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Exercise 1622
Requirement 1
($ in thousands)
Current Future
Prior Years Year Deductible
2014 2015 2016 Amounts
[total]
Net operating loss (160)
Deferred Tax Asset
Deferred Tax Asset:
Journal entry at the end of 2016
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1644 Intermediate Accounting, 8/e
Exercise 1622 (concluded)
Requirement 2
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Exercise 1623
L 1. Advance payments on insurance; tax-deductible when paid.
A 2. Estimated warranty costs; tax-deductible when paid.
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1646 Intermediate Accounting, 8/e
Exercise 1624
($ in millions)
Future Deferred
Classification Taxable Tax (Asset)
Related Balance current-C (Deductible) Tax Liability
Sheet Account noncurrent-NC Amounts Rate C NC
LiabilityWarranty expense C (15) x 40% (6)
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Exercise 1625
Requirement 1
($ in thousands)
Current Future
Year Taxable
2016 Amounts
2017 2018 2019
Pretax accounting income 810
Permanent difference (10)
Requirement 2
($ in thousands)
Income before income tax $ 810
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1648 Intermediate Accounting, 8/e
Exercise 1625 (concluded)
Requirement 3
In a classified balance sheet, deferred tax assets and deferred tax
liabilities are classified as either current or noncurrent according to how
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Exercise 1626
Requirement 1
($ in thousands)
Current Future Taxable Deferred
Year (Deductible) Tax
2016 Amounts Liab. Asset
2017 2018 2019
Pretax accounting income 810
Permanent difference (10)
Deferred Tax Asset
Deferred Tax Liability
0
0
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Exercise 1626 (concluded)
Journal entry at the end of 2016
Income tax expense (to balance) 281
Requirement 2
($ in thousands)
Pretax income $810
Requirement 3
In a classified balance sheet, deferred tax assets and deferred tax liabilities
are classified as either current or noncurrent according to how the related
assets or liabilities are classified for financial reporting. Both the deferred
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Exercise 1627
List A List B
g 1. No tax consequences a. Deferred tax liability
e 2. Originates, then reverses b. Deferred tax asset
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1652 Intermediate Accounting, 8/e
Exercise 1628
Requirement 1
Probability table:
Amount of the tax benefit that management expects to
sustain
$10
$8
$6
$4
$2
Requirement 2
Delta would record tax expense as if there is a $6 million tax credit, income tax
payable that reflects the entire $10 million credit, and a liability that represents the
potential obligation to pay the additional taxes if the deduction is not ultimately
upheld:
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Exercise 1629
Income Statement
For the fiscal year ended March 31, 2016
($ in millions)
Revenues $ 830
Cost of goods sold (350)
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1654 Intermediate Accounting, 8/e
Exercise 1630
1. The specific items to which income tax expense is allocated for intraperiod
tax allocation:
2. The tax rate used to calculate deferred tax assets and liabilities:
3. Required disclosures in the notes to financial statements for the
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CPA / CMA REVIEW QUESTIONS
CPA Exam Questions
1. c. The deferred tax liability is recognized at the rate anticipated in the
2. b. The annual rent of $36,000 is taxable in 2016 but only $18,000 is
3. c. Total income tax expense is the total of the two journal entries or
$10,000:
A. The journal entry to record current taxes before the allowance
entry is as follows:
4. a. The nondeductible book expenses are permanent differences and do not
affect taxes. The temporary depreciation difference ($25,000) times the
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1656 Intermediate Accounting, 8/e
CPA Exam Questions (concluded)
5. d. $95,000. Deferred taxes are calculated using future enacted tax rates.
Year
Temporary Differences
×
Enacted Tax Rates
=
Deferred Tax Asset
2017
$100,000
×
30 %
=
$30,000
6. c. The tax benefit of loss carryback would be $40,000 ($100,000 x 40%)
and would result in a tax refund for 2015. The other $100,000 of the loss
7. a. Only an extraordinary item requires intraperiod allocation of income tax.
"Interest income on municipal obligations" results in a permanent
8. a. IFRS. IAS No. 1, “Presentation of Financial Statements,” states that
neither the income statement nor any notes may contain any items called
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CMA Exam Questions
1. c. A deferred tax asset records the deferred tax consequences attributable
to deductible temporary differences and carryforwards. Advance
2. d. For financial reporting purposes, the reported amount: cost
accumulated depreciation of the machine at year-end, assuming
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1658 Intermediate Accounting, 8/e
CMA Exam Questions (concluded)
3. d. When one tax rate does not apply to all relevant years, a more
complex calculation is necessary. In this question, different rates
apply during the recovery period. During the years 20182020, book
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PROBLEMS
Problem 161
Requirement 1
RELATED ASSET CUMULATIVE BALANCE (NOT REQUIRED)
($ in thousands)
Collections Service Revenue
Service previous current Receivable
Revenue year year Balance
2015 $30
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1660 Intermediate Accounting, 8/e
Problem 161 (continued)
($ in thousands)
Current Future
Year Taxable
2016 Amount
Pretax accounting income 250
Temporary difference:
2015 services (30) 30

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