"3-5-2010 - EXERCISE 19-4 (a) Pretax financial...

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EXERCISE 19-4 (a) Pretax financial income for 2010. .......................................................................... $ 80,000 Excess depreciation per tax return. ........................................................................ (16,000) Excess rent collected over rent earned. .................................................................. 27,000 Nondeductible fines. .............................................................................................. 11,000 Taxable income. ..................................................................................................... $102,000 Taxable income. ..................................................................................................... $102,000 Enacted tax rate. ..................................................................................................... 30% Income tax payable. ............................................................................................... $ 30,600 (b) Income Tax Expense. ........................................................................... 27,300 Deferred Tax Asset. ............................................................................. 8,100 Income Tax Payable. .................................................................. 30,600 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 ( (27,000 ) 30% $(8,100 ) Totals $(11,000 ) $(8,100 ) $4,800 * *Because of a flat tax rate, these totals can be reconciled: $(11,000) x 30% = $(8,100) + $4,800. Deferred tax liability at the end of 2010. ............................................................... $ 4,800 Deferred tax liability at the beginning of 2010. ..................................................... 0 Deferred tax expense for 2010 (increase required in deferred tax liability). ...................................................................... $ 4,800 Deferred tax asset at the end of 2010. .................................................................... $ ( 8,100 Deferred tax asset at the beginning of 2010. .......................................................... 0 Deferred tax benefit for 2010 (increase required in deferred tax asset). ........................................................................... $ (8,100 ) Deferred tax expense for 2010. .............................................................................. $ 4,800 Deferred tax benefit for 2010. ................................................................................ (8,100 ) Net deferred tax benefit for 2010. .......................................................................... (3,300) Current tax expense for 2010 (Income tax payable). ............................................. 30,600 Income tax expense for 2010. ................................................................................ $27,300 1
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This note was uploaded on 04/09/2011 for the course MGMT 351 taught by Professor Staff during the Winter '08 term at Purdue University-West Lafayette.

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"3-5-2010 - EXERCISE 19-4 (a) Pretax financial...

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