3-29-11 Solution-1

3-29-11 Solution-1 - Q19-1. Pretax financial income is...

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Q19-1. Pretax financial income is reported on the income statement and is often referred to as income before income taxes. Taxable income is reported on the tax return and is the amount upon which a company’s income tax payable is computed.
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EXERCISE 19-1 (a) Pretax financial income for 2010. ....................................................................... $400,000 Temporary difference resulting in future taxable amounts in 2011. ......................................................................................... (55,000) in 2012. ......................................................................................... (60,000) in 2013. ......................................................................................... (75,000 ) Taxable income for 2010. .................................................................................... $210,000 Taxable income for 2010. .................................................................................... $210,000 Enacted tax rate. .................................................................................................. 30% Income tax payable for 2010. .............................................................................. $ 63,000 (b) Future Years 2011 2012 2013 Total Future taxable (deductible) amounts $55,000 $60,000 $75,000 $190,000 Tax rate 30% 30% 30% Deferred tax liability (asset) $16,500 $18,000 $22,500 $ 57,000 Deferred tax liability at the end of 2010. .......................................... $ 57,000 Deferred tax liability at the beginning of 2010. ............................... 0 Deferred tax expense for 2010 (increase in deferred tax liability). .................................................................... 57,000 Current tax expense for 2010 (Income tax payable). ...................................................................... 63,000 Income tax expense for 2010. ............................................................ $120,000 Income Tax Expense. ......................................................................... 120,000 Income Tax Payable. ................................................................ 63,000 Deferred Tax Liability. ............................................................ 57,000 (c) Income before income taxes. ............................................................. $400,000 Income tax expense Current. ..................................................................................... $63,000 Deferred. ................................................................................... 57,000 120,000 Net income. ......................................................................................... $280,000 Note : The current/deferred tax expense detail can be presented in the notes to the financial statements.
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EXERCISE 19-4 (a) Pretax financial income for 2010. ....................................................................... $ 80,000 Excess depreciation per tax return. .................................................................... (16,000)
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3-29-11 Solution-1 - Q19-1. Pretax financial income is...

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