FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Complete this question by entering your answers in the tabs below. Req 1 No 1 2-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under U.S. GAAP. 3-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under IFRS. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.) 2 Req 2A and 3A Req 2B and 3B Transaction 1 2 Answer is not complete. Tax expense - deferred Tax expense - current Tax payable Deferred tax liability Tax expense - current Deferred tax asset Tax expense - deferred Deferred tax liability Tax payable General Journal ✓ ✓ ✓ ✓ Debit 6,720✔ 91,560 36,855✔ 9,240 X Credit 91,560 6,720✔ 6,720✔ 91,560
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Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 No 1 2-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under U.S. GAAP. 3-a. Prepare the journal entry to record Melissa's 20X1 income tax activity under IFRS. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.) 2 Req 2A and 3A Req 2B and 3B Transaction 1 2 Answer is not complete. Tax expense - deferred Tax expense - current Tax payable Deferred tax liability Tax expense - current Deferred tax asset Tax expense - deferred Deferred tax liability Tax payable General Journal ✓ ✓ ✓ ✓ Debit 6,720✔ 91,560 36,855✔ 9,240 X Credit 91,560 6,720✔ 6,720✔ 91,560
Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock Exchanges. Melissa has chosen to prepare consolidated financial statements in accordance with U.S. GAAP for filing with the U.S. Securities and Exchange Commission but must also prepare consolidated financial statements in accordance with IFRS in accordance with European Union regulations. On December 31, 20X0, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an asset's depreciable base in 20X1. This is the only building that Melissa owns. At the end of 20X1, Melissa had the building appraised by a qualified real estate appraiser, who estimated the fair value of the building to be $1,172,500. Melissa intends to occupy the building itself, and, therefore, the building is classified as property, plant, and equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient income in the future to recover any deferred tax assets that might be recognized. Model used for subsequent measurement Pre-tax income before depreciation and revaluation charge Enacted tax rate U.S. GAAP Cost $500,000 21% Required: 1. Calculate Melissa's taxable income in 20X1. 2. Prepare the journal entry to record Melissa's 20X1 income tax activity under U.S. GAAP. 3. Prepare the journal entry to record Melissa's 20X1 income tax activity under IFRS. IFRS Revalued at fair value $500,000 21%
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Transcribed Image Text:Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock Exchanges. Melissa has chosen to prepare consolidated financial statements in accordance with U.S. GAAP for filing with the U.S. Securities and Exchange Commission but must also prepare consolidated financial statements in accordance with IFRS in accordance with European Union regulations. On December 31, 20X0, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an asset's depreciable base in 20X1. This is the only building that Melissa owns. At the end of 20X1, Melissa had the building appraised by a qualified real estate appraiser, who estimated the fair value of the building to be $1,172,500. Melissa intends to occupy the building itself, and, therefore, the building is classified as property, plant, and equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient income in the future to recover any deferred tax assets that might be recognized. Model used for subsequent measurement Pre-tax income before depreciation and revaluation charge Enacted tax rate U.S. GAAP Cost $500,000 21% Required: 1. Calculate Melissa's taxable income in 20X1. 2. Prepare the journal entry to record Melissa's 20X1 income tax activity under U.S. GAAP. 3. Prepare the journal entry to record Melissa's 20X1 income tax activity under IFRS. IFRS Revalued at fair value $500,000 21%
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