Chapter+18+Vol.+9+Part+2+Solutions

Chapter+18+Vol.+9+Part+2+Solutions - EXERCISE 18-13 (20-25...

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EXERCISE 18-13 (20-25 minutes) (a) Balance Deductible Sheet (Taxable) Futur e Tax Current Account Carrying Tax Temporary Tax Asset Long- Dec. 31, 2012 Amount Basis Differences Rate (Liabil ity) Term $640,000 $620,000 ($20,000) 45% ($9,0 00) LT Construction in Process 940,000 760,000 a (180,000) 45% (81,0 00) C Future income tax liability, December 31, 2012 Future income tax liability before adjustment Incr. in future income tax liability and future income tax expense for 2012 (90,000) (45,000) ($45,000) a $350,000 + $410,000 = $760,000 (b) Accounting income $120,000 Reversing differences: Property, plant, and Equipment: Depreciation expense ($460,000 – $170,000) $290,000 Capital cost allowance ($980,000 – $620,000) (360,000) (70,000) Construction in Process: Gross profit – Percentage completion ($440,000 – $410,000) (30,000)
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Gross profit – Completed contract method 0 (30,000) Taxable income $20,000 Current income taxes at 45% $9,000 2
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EXERCISE 18-13 (Continued) (c) Current Income Tax Expense. ........................... 9,000 Income Tax Payable. ................................... 9,000 Future Income Tax Expense. ............................. 45,000 Future Income Tax Liability. ....................... 45,000 (d) 2012 2011 Income before income taxes $120,000 $195,000 Income tax expense Current 9,000 42,750 Future 45,000 45,000 54,000 87,750 Net income $66,000 $107,250 (e) Refer to last two columns in table in part (a) above. 2012 2011 Non-current assets Future income tax asset $22,500 Current liabilities Future income tax liability $81,000 67,500 Non-current liabilities Future income tax liability 9,000 (f) 2012 2011 Non-current liabilities $90,000 $45,000 IFRS require that all deferred tax assets and liabilities be reported as noncurrent items on a classified statement of financial position.
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EXERCISE 18-14 (20-25 minutes) (a) Balance Deductible Tax Decrease in Sheet (Taxable) Rate Future Tax Current Account Carrying Tax Temporary Dec- (Asset) Long- Sep 15, 2012 Amount Basis Differences rease Liability Term $930,000 $980,000 $50,000 5% ($2,500) LT Construction in Process 500,000 350,000 (150,000) 5% 7,500 C Decrease in future tax liability due to decrease in tax rate $5,000 September 15, 2012 adjustment to record the impact of the decrease in tax rate on the company’s net taxable temporary difference: Future Income Tax Liability. .............................. 5,000 Future Income Tax Benefit. ........................ 5,000 4
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EXERCISE 18-14 (Continued) (b) Balance Deductible Sheet (Taxable) Futur e Tax Current Account Carrying Tax Temporary Tax Asset Long- Dec. 31, 2012 Amount Basis Differences
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This note was uploaded on 08/02/2011 for the course ACCT 352 taught by Professor Freeman during the Summer '11 term at Windsor.

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Chapter+18+Vol.+9+Part+2+Solutions - EXERCISE 18-13 (20-25...

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