Concept introduction:
Stocks (Common Stock and Preferred Stock):
These are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the
Cash dividend:
The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two
To prepare:
The Statement of
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Cornerstones of Financial Accounting
- Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350arrow_forwardComprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax income from continuing operations (of which revenues are 295,000), the following items are included in this pretax income: Colts taxable income totals 93,000 in 2019. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2019, Colt had a retained earnings balance of 310.000 and a deferred tax liability of 8,100. During 2019, Colt declared and paid dividends of 48,000. It is subject to tax rates of 15% on the first 50,000 of income and 30% on income in excess of 50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2019 ending deferred tax liability is 14,100. Required: 1. Prepare a schedule for Colt to allocate the total 2019 income tax expense to the various components of pretax income. 2. Prepare Colts income tax journal entry at the end of 2019. 3. Prepare Colts 2019 income statement. 4. Prepare Colts 2019 statement of retained earnings. 5. Show the related income tax disclosures on Colts December 31, 2019, balance sheet.arrow_forwardDue to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $54 million as of December 31, 2024. Crote has a tax rate of 20%. Crote's retained earnings as of December 31, 2024, would be:arrow_forward
- The following information is available for Pearl Corporation for 2019 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $36,800. This $36,800 difference will reverse equally over the years 2020–2023. 2. Deferral, for book purposes, of $20,200 of rent received in advance. The rent will be recognized in 2020. 3. Pretax financial income, $310,100. 4. Tax rate for all years, 20%. (a) Compute taxable income for 2019. Taxable income $enter Taxable income in dollarsarrow_forwardAscension Company has estimated that total depreciation expense for the year ending December 31, 2019 will amount to P2,000,000, and the 2019 year-end bonuses to employees will total P4,000,000. Ascension paid P500,000 property taxes assessed for the year 2019. On June 30, 2019, Ascension incurred a permanent inventory loss from a market decline of P800,000 and an extraordinary loss of P200,000. In the interim income statement for the six months ended June 30, 2019, what total amount of expense relating to these items should be reported? 4,250,000 3,850,000 3,750,000 3,450,000arrow_forwardSweet Inc. incurred a net operating loss of $489,000 in 2020. The tax rate for all years is 20%. Prepare the journal entries to record the benefits of the loss carryforward. Sweet expects to return to profitability in 2021.arrow_forward
- Principal Services Group had a 2021 Net Loss of $460,000. The company tax rate is 27% and pre-tax income for the years 2022, 2023, and 2024 were $190,000, $630,000, and $430,000 respectively. Answer the following: A. Provide the journal entry for 2021. B. Provide the journal entry for 2023. Note: you must specify whether the deferred tax account is an asset or liability.arrow_forwardThe following information is available for Sandhill Corporation for 2019 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $40,400. This $40,400 difference will reverse equally over the years 2020–2023. 2. Deferral, for book purposes, of $19,900 of rent received in advance. The rent will be recognized in 2020. 3. Pretax financial income, $284,700. 4. Tax rate for all years, 20%.arrow_forwardRode Inc. incurred a net operating loss of $500,000 in 2020. Combined income for 2018 and 2019 was $350,000. The tax rate for all years is 20%. Prepare the journal entries to record the benefits of the loss carryforward.arrow_forward
- On January 2, 2024, Tobias Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2024, the amount of the change in accumulated depreciation is $47,500. The appropriate tax rate is 25%. The separately reported change in 2024 earnings is:arrow_forwardThe following information is available for Pronghorn Corporation for 2019 (its first year of operations). 1. Excess of tax depreciation over book depreciation, $41,200. This $41,200 difference will reverse equally over the years 2020–2023. 2. Deferral, for book purposes, of $18,700 of rent received in advance. The rent will be recognized in 2020. 3. Pretax financial income, $319,200. 4. Tax rate for all years, 20%. Compute taxable income for 2019. Taxable income $enter Taxable income in dollars eTextbook and Media List of Accounts Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and…arrow_forwardUse the following information to answer the next 3 questions. Retained earnings, 12/31/18, as reported $ 2,000,000 Correction of overstatement of depreciation expense in prior $4 215,000 years, net of tax (found in 2019) Dividends declared (2019) $ 160,000 Net Income (2019) $ 500,000 Accumulated Other Comprehensive Income, 12/31/18 175,000 Unrealized holding loss due to changes in fair value (2019) $ 24,000 Common Stock, 12/31/2018 $ 1,255,000 Additional Paid in Capital, 12/31/2018 $10,500,000arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning