Neil Gonzales, ACCT 420-V3WW, Assignment 2-3 Final

Neil Gonzales, ACCT 420-V3WW, Assignment 2-3 Final - Neil...

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Neil Gonzales Assignment 2-3 Chapter 17 Practice Problems 5 points Due: May 8 Purpose To assess your ability to: determine a corporation’s income tax liability determine the effects of stock transactions by corporations L 3 Traits Action Items 1. Complete problems 23, 30, 34, 38, 40, and 44 in Chapter 17 of West Federal Taxation . Chapter 17: 23. Sarah Carter, the CFO of Mac, Inc. notices that the tax expense reported on Mac’s tax return differs from the tax return differs from the tax expense reported on Mac’s financial statement. Provide a letter to Sarah outlining why these two tax expense numbers differ. Mac’s address is 482 Linden Road, Paris, KY 40362. Neil Gonzales, Accounting Student 123 Sunbridge Lane Dublin, OH 43017 Mac, Inc. ATTN: Ms. Sarah Carter, CFO 482 Linden Road Paris, KY 40362 Dear Ms. Sarah Carter: I am writing you regarding your inquiry on outlining why Mac’s tax return differs from the tax return differ from the tax expense reported on Mac’s financial statement. This difference could be a result from the different meaning of taxes on the income tax expense,
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variations in entities’ reporting their tax calculations, and variations of accounting methods. First, the different meaning of taxes on the income tax expense includes current and deferred tax expense totals. In addition, the tax expense totals on the company’s financial statements include local, state, federal, and foreign income tax totals. The total income tax expense reported for the current year only includes Federal income tax expense. Second, if the parent company controls at least 50% of the subsidiaries power of voting, the parent and its subsidiaries must combine their local, state, foreign, and federal tax expenses into one financial statement. If the parent company owns 20% to 50% of its subsidiaries, the company would use the equity method to determine its subsidiaries earnings or losses. If a parent company owns less than 20% of their subsidiaries, they would generally use the cost method to determine its income. Because the company used the cost method system, the parent company would only include the subsidiaries income when they actually receive its dividends. Parent companies with less than 80% ownership of its subsidiaries and foreign subsidiaries are not included in the combined tax return. Finally, variations in accounting methods could show difference from their tax return and
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This note was uploaded on 05/25/2011 for the course ACCT 420 taught by Professor Fidler during the Winter '08 term at Franklin.

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Neil Gonzales, ACCT 420-V3WW, Assignment 2-3 Final - Neil...

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