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Ch19 solutions 10-18-p1

Ch19 solutions 10-18-p1 - Accounting for Income Taxes...

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Accounting for Income Taxes EXERCISE 19-10 (20–25 minutes) Income (loss) tax rate 1999 29,000 30% 2000 40,000 30% 2001 17,000 35% 2002 48,000 50% 2003 (150,000) 40% 2004 90,000 40% 2005 30,000 40% 2006 105,000 40% 2007 (60,000) 45% Assume the carryback provision is employed for net operating losses. (a)what entry for income taxes should be recorded for 2003? Income Tax Refund Receivable 29,950 [($17,000 X 35%) + ($48,000 X 50%)] Benefit Due to Loss Carryback ...................................... 29,950 Deferred Tax Asset ................................................................... 34,000 Benefit Due to Loss Carryforward ................................ 34,000 ($150,000 – $17,000 – $48,000 = $85,000) ($85,000 X 40% = $34,000) (b)indicate what the income tax expense portion of the income statement for2003 should look like. Operating loss before income taxes $(150,000) Income tax benefit Benefit due to loss carryback $29,950 Benefit due to loss carryforward 34,000 63,950 Net loss $ (86,050 ) (c)what entry for income taxes should be recorded in 2004? Income Tax Expense ................................................................. 36,000 Deferred Tax Asset ......................................................... 34,000 Income Tax Payable .......................................................... 2,000 [40% X ($90,000 – $85,000)] (d)how should the income tax expense section of the income statement for 2004 appear? Income before income taxes $90,000 Income tax expense 19-1
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Current $ 2,000 Deferred 34,000 36,000 Net income $54,000 (e) what entry for income taxes should be recorded in 2007?
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