Chapter 19 - EXERCISE 19-1 (a) Pretax financial income for...

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Unformatted text preview: EXERCISE 19-1 (a) Pretax financial income for 2007 $300,000 Temporary difference resulting in future taxable amounts in 2008 (55,000) in 2009 (60,000) in 2010 (65,000) Taxable income for 2007 $120,000 Taxable income for 2007 $120,000 Enacted tax rate 30% Income tax payable for 2007 $ 36,000 (b) Future Years 2008 2009 2010 Total Future taxable (deductible) amounts $55,000 $60,000 $65,000 $180,000 Tax rate 30% 30% 30% Deferred tax liability (asset) $16,500 $18,000 $19,500 $ 54,000 Deferred tax liability at the end of 2007 $54,000 Deferred tax liability at the beginning of 2007 Deferred tax expense for 2007 (increase in deferred tax liability) 54,000 Current tax expense for 2007 (Income tax payable) 36,000 Income tax expense for 2007 $90,000 Income Tax Expense ................................................ 90,000 Income Tax Payable.......................................... 36,000 Deferred Tax Liability........................................ 54,000 (c) Income before income taxes $300,000 Income tax expense Current $36,000 Deferred 54,000 90,000 Net income $210,000 Note: The current/deferred tax expense detail can be presented in the notes to the financial statements. 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 Deferred Tax Temporary Difference Future Taxable (Deductible) Amounts Tax Rate (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 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 Deferred tax benefit for 2007 (increase required in deferred tax asset) $(6,600 ) 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....
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This note was uploaded on 06/05/2010 for the course ID 7667565 taught by Professor London during the Spring '10 term at Aberystwyth University.

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Chapter 19 - EXERCISE 19-1 (a) Pretax financial income for...

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