{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

chapter19excel - CORPORATE TAX RATE 35 BOOK GAAP Sales...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CORPORATE TAX RATE: 35% BOOK/ GAAP TAX/ IRC DIFFERENCE Sales 100,000 100,000 - COS 75,000 75,000 - SG&A 8,000 8,000 - Depreciation 10,000 12,000 (2,000) INCOME BEFORE INCOME TAX 7,000 5,000 2,000 Income tax rate 35% 35% 35% Income tax provision have to solve 1,750 700 NET INCOME need to know tax provision N/A N/A The depreciation difference will "reverse" over time, but we need to do something about it right now! Since this is a balance sheet approach, we first find the balance sheet amounts then solve for the tax expense to record. We are getting more of a deduction for dep. than we expense (this year) for GAAP. This creates a deferred tax liability because we will be recording more expense in the future. We compute the deferred tax asset as follows: Book/Tax difference 2,000 Effective rate 35% DEFERRED TAX ASSET 700 We owe Uncle Sam 1,750 ENTRY: Deferred tax liability 700 Income tax payable 1,750 Income tax provision 2,450 NOTE that the income tax expense of $2,450, which was a plug for us, works out to be 35% of the GAAP income before income tax!!
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern