Solution_Week 2_P 19-1

Solution_Week 2_P 19-1 - Name: Problem: Course: Date:...

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Problem 19-1 Solution, Page 1 of 6, 11/12/2010, 07:07:47 Name: Solution Problem: Course: Date: $120,000 This difference will reverse in equal amounts of $30,000 over the years 2011-2014 2. Interest received on municipal bonds was $10,000 3. Rent collected in advance on January 1, 2010, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, for book purposes. 4. The tax rates are 40% for 2010 and 35% for 2011 and subsequent years. 5. Income taxes of $320,000 are due per the tax return for 2010. 6. No deferred taxes existed at the beginning of 2010. Instructions: A = Net Income, B = Tax Rate, C = Income Tax, A X B = C, C / B = A A X 40% = $320,000 $320,000 / 40% = A A = $800,000 = Taxable income for 2010 Taxable income from part (a) $800,000 Excess depreciation 120,000 Municipal interest 10,000 Unearned rent (40,000) Pretax financial income for 2010 $890,000 payable for 2010 and 2011. Assume taxable income was $980,000 in 2011. 2010 Income Tax Expense ($320,000 + $42,000 - $14,000) 348,000 Deferred Tax Asset ($40,000 * 35%) 14,000 Income Tax Payable ($800,000 * 40%) 320,000 Deferred Tax Liability ($120,000 * 35%) 42,000 2011 Income Tax Expense ($343,000 + $7,000 - $10,500) 339,500 Deferred Tax Liability [($120,000 / 4) * 35%] 10,500 Income Tax Payable ($980,000 * 35%) 343,000 Deferred Tax Asset [($40,000 / 2) * 35%] 7,000 P19-1, Three Differences, No Beginning Deferred Taxes, Multiple Rates
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This note was uploaded on 11/11/2010 for the course AC AC557 taught by Professor Ellis during the Summer '10 term at DeVry Long Beach.

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Solution_Week 2_P 19-1 - Name: Problem: Course: Date:...

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