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Solutions Chapter 19 - BRIEF EXERCISE 19-1 2010 taxable...

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BRIEF EXERCISE 19-1 2010 taxable income .................................................................. $120,000 Tax rate ....................................................................................... X .............................................................................................. 40% 12/31/10 income taxes payable ................................................ $ 48,000 BRIEF EXERCISE 19-2 Excess depreciation on tax return ........................................... $40,000 Tax rate ....................................................................................... 30% Deferred tax liability .................................................................. $12,000 BRIEF EXERCISE 19-3 Income Tax Expense ................................................... $67,500*** Deferred Tax Liability ........................................... 12,000** Income Tax Payable ............................................. 55,500* *$185,000 x 30% = $55,500 **$40,000 x 30% = $12,000 ***$55,500 + $12,000 = $67,500 The $12,000 deferred tax liability should be classified as a noncurrent liability. The balances in the deferred tax accounts should be classified in the same manner as the related asset. Since property, plant, and equipment is a noncurrent asset, noncurrent liability is the proper classification for the deferred tax liability. BRIEF EXERCISE 19-4 Deferred tax liability, 12/31/11 ......................................................... ............................................................................................... $42,000 Deferred tax liability, 12/31/10 ......................................................... 25,000
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Deferred tax expense for 2011 ........................................................ 17,000 Current tax expense for 2011 .......................................................... 48,000 Total tax expense for 2011 ............................................................... ............................................................................................... $65,000
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BRIEF EXERCISE 19-5 Book value of warranty liability ..................................................... ............................................................................................ $105,000 Tax basis of warranty liability ........................................................ 0 Cumulative temporary difference at 12/31/10 ............................... 105,000 Tax rate ............................................................................................. X .................................................................................................... 40% 12/31/10 deferred tax asset ............................................................. $ 42,000 BRIEF EXERCISE 19-6 Deferred tax asset, 12/31/11 ........................................................... $59,000 Deferred tax asset, 12/31/10 ........................................................... 30,000 Deferred tax benefit for 2011 .......................................................... (29,000) Current tax expense for 2011 ......................................................... 61,000 Total tax expense for 2011 .............................................................. $32,000 BRIEF EXERCISE 19-7 Income Tax Expense ......................................................... 60,000 Allowance to Reduce Deferred Tax Asset to Expected Realizable Value ............................... 60,000 BRIEF EXERCISE 19-8 Income before income taxes ............................................ $195,000 Income tax expense Current ........................................................................ $48,000 Deferred ...................................................................... 30,000 78,000
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Net income ......................................................................... $117,000 BRIEF EXERCISE 19-9 Income Tax Expense ......................................................... 71,100 Income Tax Payable ($148,000* X 45%) ................... 66,600 Deferred Tax Liability ($10,000 X 45%) .................... 4,500 *$154,000 + $4,000 – $10,000 = $148,000 BRIEF EXERCISE 19-10 Year Future taxable amount X Tax Rate = Deferred tax liability 2011 $ 42,000 34% $ 14,280 2012 244,000 34% 82,960 2013 294,000 40% 117,600 $214,840 BRIEF EXERCISE 19-11 Income Tax Expense ....................................................... 120,000 Deferred Tax Liability ($2,000,000 X 6%) ............... 120,000 BRIEF EXERCISE 19-12 Income Tax Refund Receivable ...................................... 144,000 Benefit Due to Loss Carryback $97,500 + [($480,000–$325,000) X 30%] ............. 144,000 BRIEF EXERCISE 19-13 Income Tax Refund Receivable ($350,000 X .40) .......... 140,000
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Benefit Due to Loss Carryback ............................... 140,000 Deferred Tax Asset ($500,000 – $350,000) X .40 ........... 60,000 Benefit Due to Loss Carryforward .......................... 60,000 BRIEF EXERCISE 19-14 Income Tax Refund Receivable ($350,000 X. 40) .......... 140,000 Benefit Due to Loss Carryback ............................... 140,000 Deferred Tax Asset ($500,000 – $350,000) X .40 ........... 60,000 Benefit Due to Loss Carryforward .......................... 60,000 Benefit Due to Loss Carryforward ................................. 60,000 Allowance to Reduce Deferred Tax Asset to Expected Realizable Value .............................. 60,000 BRIEF EXERCISE 19-15 Current assets Deferred tax asset ($62,000 – $38,000) .................. $24,000 Long-term liabilities Deferred tax liability ($96,000 – $27,000) ............... $69,000 EXERCISE 19-1 (15–20 minutes) (a) Pretax financial income for 2010 ............................................ $400,000 Temporary difference resulting in future taxable
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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 ...........................................
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