Class21 - Solutions

Class21 - Solutions - EXERCISE 19-4(a Pretax financial...

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EXERCISE 19-4 (a) Pretax financial income for 2007 $70,000 Excess depreciation per tax return (16,000) Excess rent collected over rent earned 22,000 Nondeductible fines 11,000 Taxable income $87,000 Taxable income $87,000 Enacted tax rate 30% Income tax payable $26,100 (b) Income Tax Expense. ...................................... 24,300 Deferred Tax Asset. ........................................ 6,600 Income Tax Payable. ................................ 26,100 Deferred Tax Liability. .............................. 4,800 Temporary Difference Future Taxable (Deductible) Amounts Tax Rate Deferred Tax (Asset) Liability Depreciation ( $16,000 30% $4,800 Unearned rent ( (22,000) 30% $(6,600) Totals $ (6,000) $(6,600) $4,800* *Because of a flat tax rate, these totals can be reconciled: $(6,000) x 30% = $(6,600) + $4,800. Deferred tax liability at the end of 2007 $4,800 Deferred tax liability at the beginning of 2007 0 Deferred tax expense for 2007 (increase required in deferred tax liability) $4,800 Deferred tax asset at the end of 2007 $ ( 6,600 Deferred tax asset at the beginning of 2007 0 Deferred tax benefit for 2007 (increase required in deferred tax asset) $(6,600 ) 1
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EXERCISE 19-4 (Continued) Deferred tax expense for 2007 $ 4,800 Deferred tax benefit for 2007 (6,600 ) Net deferred tax benefit for 2007 (1,800) Current tax expense for 2007 (Income tax payable) 26,100 Income tax expense for 2007 $24,300 (c) Income before income taxes $70,000 Income tax expense Current $26,100 Deferred (1,800 ) 24,300 Net income $45,700 Note: The details on the current/deferred tax expense may be presented in a note to the financial statements. (d) $24,300 = 34.7% effective tax rate for 2007. $70,000 2
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EXERCISE 19-5 (a) Taxable income $95,000 Enacted tax rate 40% Income tax payable $38,000 (b) Income Tax Expense. ...................................... 80,000 Deferred Tax Asset. ........................................ 14,000 Income Tax Payable. ................................ 38,000 Deferred Tax Liability. .............................. 56,000 Temporary Difference Future Taxable (Deductible) Amounts
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Class21 - Solutions - EXERCISE 19-4(a Pretax financial...

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