View PoliciesShow Attempt HistoryCullumber Corporation purchased equipment very late in 2023. Based on generous capital cost allowance rates provided in theIncome Tax Act, Cullumber claimed CCA on its 2023 tax return but did not record any depreciation because the equipment was beitested. This temporary difference will reverse and cause taxable amounts of $29,300 in 2024, $37,800 in 2025, and $41,200 in 202Cullumber's accounting income for 2023 is $238,600 and $202,600 in each of 2024 and 2025, and the tax rate for 2023, 2024 and2025 is 30%. There are no deferred tax accounts at the beginning of 2023. Cullumber Corporation was informed on December 31.2024 that the enacted rate for 2025 and subsequent years is 25%.(a)ow Transcribed TextDatePrepare the journal entries to record income taxes for 2024 and 2025. (List all debit entries before credit entries. Credit account titlesare automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the accounttitles and enter O for the amounts. Record journal entries in the order presented in the problem.)2024 V2024 VAccount Titles and ExplanationCurrent Tax ExpenseIncome Tax Payable(To record current tax expense)Deferred Tax LiabilityDeferred Tax BenefitJ(To record deferred tax benefit)CDebit695708790Credit695708790

A journal entry functions as a documented record of a financial transaction within the realm of…

Prepare the journal entries to record income taxes for 2024 and 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)

Prepare the journal entries to record income taxes for 2024 and 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 7P: Deferred Tax Liability: Depreciation At the beginning of 2019, its first year of operations, Cooke...

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View Policies Current Attempt in Progress In 2022, Windsor Ltd. recelved a grant for V208 million to defray the cost of purchasing research equipment for Its manufacturing facility. The total cost of the equipment is V104 million. Prepare the journal entry to record this transaction if Windsor uses (a) the deferred revenue approach, and (b) the reduction of asset approach. (Credit account titles are dutomatically indented when amount is entered. Do not indent manually f no entry is required, select "No Entry" for the account titles and enter O for the amounts. Enter amounts in full not rounded to millions) No. Account Titles and Explanation Debit Credit (a) (b) e Textbook and Media List of Accounts
View Policies Show Attempt History Current Attempt in Progress Your answer is partially correct. Waterway Ltd. owns land that it purchased at a cost of ¥464,000 in 2020. The company chooses to use revaluation accounting to account for the land. The land's value fluctuates as follows (all amounts in thousands as of December 31): 2020, ¥522,000; 2021, ¥417,600; 2022, ¥446,600; 2023, ¥475,600; and 2024, ¥533,600. Complete the following table. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Value at December 31 2020 2021 2022 2023 2024 Other Comprehensive Income 58000 (46400) (17400) 11600 69600 Accumulated Other Comprehensive Income 58000 (46400) (17400) 11600 69600 Recognized in Net Income 58000 (46400) (17400) 11600 69600
urrent Attempt in Progress Oriole Inc's only temporary difference at the beginning and end of 2024 is caused by a $3.15 million deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one-half of which is classified as a current asset) is due in equal installments in 2025 and 2026. The related deferred tax liability at the beginning of the year is $945,000. In the third quarter of 2024, a new tax rate of 20% is enacted into law and is scheduled to become effective for 2026. Taxable income for 2024 is $5,250,000, and taxable income is expected in all future years. (a) Your answer is incorrect. Determine the amount reported as a deferred tax liability at the end of 2024. Deferred tax liability $ eTextbook and Media eTextbook 1 Assistance Used SUPPORT
! Required information P9-13 (Static) Recording and Reporting Deferred Income Tax: Depreciation (Supplement B) LO9-6 [The following information applies to the questions displayed below.] Mansfield Corporation purchased a new piece of equipment at the beginning of Year 1 for $1,000,000. The expected life of the asset is 20 years with no residual value. The company uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes (the accelerated method results in $100,000 of depreciation each year). The company's federal income tax rate is 21%. The company determined its income tax obligations for Year 1 and Year 2 were $400,000 and $625,000, respectively. P9-13 Part 1 Required: 1-a. Compute the deferred income tax amount reported on the balance sheet for each year. Deferred Income Tax Year 1 $ 950,000 Year 2
Doug Smith Industries purchased warehouses for $121 million (no residual value) at the beginning of 2021. The warehouses were being de year life using the sum-of-the-years'-digits method. At the beginning of 2024, management decided to change to straight-line. Ignoring tax entry will include a debit to depreciation expense of: Note: Round your answer to 2 decimal places. 3:20 Multiple Choice $12.10 million. $8.80 million. $61.60 million. $59.40 million.
Depreciation as a Tax Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $100,000. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $50,000 per year for the next five years. The corporation is currently in the 35% tax bracket.
Depreciation as a Tax Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $123,300. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $46,900 per year for the next five years. The corporation is currently in the 30% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4
Depreciation as a Tax Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $143,800. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $48,400 per year for the next five years. The corporation is currently in the 25% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $ 2a. Amount of depreciation if asset is purchased is: $ b. Amount of taxes paid if asset is purchased is: $ 3. What is the amount of the depreciation tax shield? $
The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $100,000. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $50,000 per year for the next five years. The corporation is currently in the 35% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Deferred Tax Liability: Depreciation At the beginning of 2019, its first year of operations, Cooke Company purchased an asset for 100,000. This asset has an 8-year economic life with no residual value, and it is being depreciated by the straight-line method for financial reporting purposes. For tax purposes, however, the asset is being depreciated using the MACRS (200%, 5-year life) method. During 2019, Cooke reported pretax financial income of 51,500 and taxable income of 44,000. The depreciation temporary difference caused the difference between the two income amounts. The tax rate in 2019 was 30%, and no change in the tax rate had been enacted for future years. Required: 1. Prepare a schedule that shows for each year, 2019 through 2026, (a) MACRS depreciation, (b) straight line depreciation, (c) the annual depreciation temporary difference, and (d) the accumulated temporary difference at the end of each year. 2. Prepare a schedule that computes for each year, 2019 through 2026, (a) the ending deferred tax liability and (h) the change in the deferred tax liability. 3. Prepare Cookes income tax journal entry at the end of 2019. 4. Next Level Explain what happens to the balance of the deferred tax liability at the end of 2019 through 2026.
Magnus Corporation purchased $90,000 of five-year equipment on March 10, 2019 and elected to expense $20,000 of the cost under Section 179. Compact sells the equipment on July 30, 2021, for $95,000. Compact deducted $25,200 under MACRS depreciation. What is the proper classification of the gain? Group of answer choices Section 1245 ordinary income is $50,200; Section 1231 gain is $0 Section 1245 ordinary income is $0; Section 1231 gain is $50,200 Section 1245 ordinary income is $5,000; Section 1231 gain is $45,200 Section 1245 ordinary income is $45,200; Section 1231 gain is $5,000