Related questions
Concept explainers
Interperiod Tax Allocation Quick Company reports the following revenues and expenses in its pretax financial income for the year ended December 31, 2010:
The revenues included in pretax financial income are the same amount as the revenues included in the company’s taxable income. A reconciliation of the expenses reported for pretax financial income to the expenses reported for taxable income, however, reveals four differences:
1. Depreciation deducted for financial reporting exceeded depreciation deducted for income taxes by $11,000
2. Percentage depletion deducted for income taxes exceeded cost depletion deducted for financial reporting by $15,600
3. Warranty costs deducted for income taxes exceeded warranty expenses deducted for financial reporting by $8,900
4. Legal expense of $9,800 was deducted for financial reporting; it will be deducted for income taxes when paid in a future year
The company expects its percentage depletion to exceed its cost depletion in each of the next five years by the same amount as in 2010. At the end of 2010, the other three expenses are expected to result in total future taxable or deductible amounts as follows:
At the beginning of 2010, the company had a deferred tax liability of $22,200 related to the depreciation difference and a deferred tax asset of $17,190 related to the warranty difference. The income tax rate for 2010 is 35%, but in 2009, Congress enacted a 30% rate for 2011 and future years.
Required
1. Compute the Quick Company’s taxable income for 2010.
2. Prepare the income tax journal entry of the Quick Company for 2010. Assume no valuation allowance is necessary.
3. Prepare a condensed 2010 income statement for the Quick Company.
Step by stepSolved in 3 steps with 5 images
- Do not give answer in image and hand writingarrow_forwardRecording Income Tax Expense Rangee Rover Inc. had taxable income of $218,500 for the year. The GAAP basis of accounts receivable (net) is $13,800 less than the tax basis of accounts receivable. Assuming a tax rate of 25%, record the income tax journal entry on December 31. Assume zero beginning balances in deferred tax accounts. • Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Account Name Cr. Dec. 31 Income Tax Expense Deferred Tax Liability Income Tax Payable N/A To record income tax expense. > > Dr. 54,625 0 0 O 0x 13,800 * 40,825 * 0arrow_forwardBook income of $1,900,000 Included in the computation were favorable temporary differences of $230,000, unfavorable temporary differences of $226,000 and favorable permanent differences of $168,000. What is the company's deferred income tax expense or benefit?arrow_forward
- Recording and Reporting Multiple Temporary Differences The records of Cross Corporation provided the following income tax allocation data. Taxable income Depreciation expense Bad debt expense Pretax GAAP income Required • The depreciation adjustment results from a difference between the GAAP basis and tax basis of depreciable equipment. • The bad debt expense adjustment results from a difference between the GAAP basis and tax basis of net accounts receivable. o The deferred tax accounts have a zero balance at the start of 2020. Tax rate is 25%. a. Journal Entries a. Record the income tax journal entry on December 31, 2020. b. Record the income tax journal entry on December 31, 2021. c. Record the income tax journal entry on December 31, 2022. d. Record the income tax journal entry on December 31, 2023. • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. • Note: If the journal entry includes an extra…arrow_forwardInterperiod Tax Allocation Quick Company reports the following revenues and expenses in its pretax financial income for the year ended December 31, 2013: Revenues 229,600 Expenses (160,100) Pretax financial income 69,500 The revenues included in pretax financial income are the same amount as the revenues included in the company’s taxable income. A reconciliation of the expenses reported for pretax financial income to the expenses reported for taxable income, however, reveals four differences: 1. Depreciation deducted for financial reporting exceeded depreciation deducted for income taxes by $11,000. 2. Percentage depletion deducted for income taxes exceeded cost depletion deducted for financial reporting by 15600. 3. Warranty costs deducted for income taxes exceeded warranty expenses deducted for financial reporting by 8900. 4. Legal expense of $9,800 was deducted for financial reporting; it will be deducted for income taxes when…arrow_forwardMetlock Company reported the following pretax financial income (loss) for the years 2018-2022. 2018 $235,200 2019 343,000 2020 117,600 2021 (558,600) 2022 176,400 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2018 and 2019, and 20% for 2020-2022. Assume the carryback provision is used first for net operating losses. SUPPOarrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education