073Q6 - permanent difference between FA and TA income: life...

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Name______ Zhi Pei _________________4-Digit _ 7688 ____ Section____ 14518 __ Accounting for Income Taxes: [073Q6] Harry Company had been in operation for several years. Harry has regularly experienced temporary and permanent differences between its financial statements and tax returns. At the start of Year 5, Harry had a balance in its Deferred Tax Liability account of $1,200. Through the end of the previous year, the firm’s financial accounting [FA] income had exceeded its tax accounting [TA] income by $3,000 when considering only the firm’s temporary differences. The tax rate at the end of the previous year had been 40% and this rate had been expected to apply to all future periods. In Year 5, the firm’s FA income before taxes had been $6,000 and there was only one
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Unformatted text preview: permanent difference between FA and TA income: life insurance premiums paid (Harry is the beneficiary) had been $1,000. In Year 5, there had been two temporary differences: (1) FA Warranty Expense had been $1,600 smaller than in TA and (2) Rent Revenue had been $800 smaller in FA than in TA. The firms tax rate in Year 5 was 30%. Required: $____1860____ Determine Harrys Current Tax Expense [CTE] for Year 5. If CTE is a credit, put your answer in (parentheses). Place your answer in the space provided. $____(60)_____ Determine Harrys Deferred Tax Expense [DTE] for Year 5. If DTE is a credit, put your answer in (parentheses). Place your answer in the space provided....
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