EXERC 13 Calculating Deferred Income Taxes. The Harmon Corporation prepared the following income statements and income tax returns for Year 1 through Year 4. Income Statement Sales. Operating expenses. Pretax net income. Provisions for income taxes Net income Income Tax Return Sales. Operating expenses. Taxable income Income tax payable After-tax net income. Year 1 $1,000 650 350 140 $ 210 Year 2 $1,000 1650 Year 1 $1,000 900 350 140 $ 210 Year 2 $1,000 900 1000 100 Year 3 $1,000 650 350 140 $ 210 Year 3 $1,000 400 600 200 $1,000 650 350 140 $ 210 Year 4 $1,000 400 600 200 8080 $ 20 $ 20 $ 400 $ 400 TA 2 Calculate the balance in the company's deferred income tax liability account at the end of each year. Explain what a growing balance in the deferred income tax liability is likely to indicate about a company's net income relative to its taxable income. Why might investment professionals view this situation positively? Negatively? muuces straight-line depreciation

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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EXERC
13 Calculating Deferred Income Taxes.
The Harmon Corporation prepared the following income statements TA 2
and income tax returns for Year 1 through Year 4.
Income Statement
Sales...
Operating expenses
..
Pretax net income.
Provisions for income taxes.
Net income..
Income Tax Return
Sales....
Operating expenses...
Taxable income
Income tax payable ...
After-tax net income....
I
..
..
Year 1
$1,000
650
350
140
$ 210
Year 1
$1,000
900
SA
$
100
80
20
Year 2
$1,000
650
350
140
$ 210
Year 2
$1,000
900
100
Hoy 80
$20
Year 3
$1,000
650
350
140
$ 210
Year 3
$1,000
400
$1,000
650
$
350
140
|
210
Year 4
$1,000
400
600
600
200
200
$ 400 $ 400
von Wand Insol a
Calculate the balance in the company's deferred income tax liability account at the end of each year. Explain
what a growing balance in the deferred income tax liability is likely to indicate about a company's net income
relative to its taxable income. Why might investment professionals view this situation positively? Negatively?
uses straight-line depreciation
TA 2
Homework
MBO
Transcribed Image Text:EXERC 13 Calculating Deferred Income Taxes. The Harmon Corporation prepared the following income statements TA 2 and income tax returns for Year 1 through Year 4. Income Statement Sales... Operating expenses .. Pretax net income. Provisions for income taxes. Net income.. Income Tax Return Sales.... Operating expenses... Taxable income Income tax payable ... After-tax net income.... I .. .. Year 1 $1,000 650 350 140 $ 210 Year 1 $1,000 900 SA $ 100 80 20 Year 2 $1,000 650 350 140 $ 210 Year 2 $1,000 900 100 Hoy 80 $20 Year 3 $1,000 650 350 140 $ 210 Year 3 $1,000 400 $1,000 650 $ 350 140 | 210 Year 4 $1,000 400 600 600 200 200 $ 400 $ 400 von Wand Insol a Calculate the balance in the company's deferred income tax liability account at the end of each year. Explain what a growing balance in the deferred income tax liability is likely to indicate about a company's net income relative to its taxable income. Why might investment professionals view this situation positively? Negatively? uses straight-line depreciation TA 2 Homework MBO
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