chap19n - CHAPTER 19 SOLUTIONS TO BRIEF EXERCISES BRIEF...

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CHAPTER 19 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 19-1 2007 taxable income $110,000 Tax rate X 40% 12/31/07 income taxes payable $ 44,000 BRIEF EXERCISE 19-2 Excess depreciation on tax return $30,000 Tax rate 30% Deferred tax liability $ 9,000 BRIEF EXERCISE 19-3 Income Tax Expense. ........................................................................... $67,500 Deferred Tax Liability. ............................................................... 9,000 Income Tax Payable. ................................................................... 58,500 The $9,000 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 Total tax expense for 2007 $60,000 BRIEF EXERCISE 19-5 12/31/07 deferred tax asset $ 50,000 BRIEF EXERCISE 19-6 Total tax expense for 2007 $37,000 BRIEF EXERCISE 19-7 Income Tax Expense. ................................................................................... 80,000 Allowance to Reduce Deferred Tax Asset to Expected Realizable Value. ....................................................... 80,000 BRIEF EXERCISE 19-8 Income before income taxes $175,000 Income tax expense Current $40,000 Deferred 30,000 70,000 Net income $105,000 BRIEF EXERCISE 19-9 Income Tax Expense. ................................................................................... 71,100 Income Tax Payable ($144,000* X 45%). ........................................ 64,800 Deferred Tax Liability ($14,000 X 45%). ........................................ 6,300 This method of calculating the DTL in not valid. It is necessary to know the difference between basis and book value to evaluate this liability!!!!!!!!!!!!. 19-1
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BRIEF EXERCISE 19-10 Year Future taxable amount X Tax Rate = Deferred tax liability 2008 $ 42,000 34% $ 14,280 2009 294,000 34% 99,960 2010 294,000 40% 117,600 $231,840 BRIEF EXERCISE 19-11 Income Tax Expense. ................................................................................. 80,000 Deferred Tax Liability ($2,000,000 X 4%). ................................... 80,000 This assumes that no depreciation differences between books and tax occur between Jan. 1 and May of 2007!!!!! BRIEF EXERCISE 19-12 Income Tax Refund Receivable. ............................................................... 135,000 Benefit Due to Loss Carryback. ...................................................... 135,000 BRIEF EXERCISE 19-13 Income Tax Refund Receivable ($400,000 X .40). ................................... 160,000 Benefit Due to Loss Carryback. ...................................................... 160,000 Deferred Tax Asset ($500,000 – $400,000) X .40. .................................... 40,000 Benefit Due to Loss Carryforward. ................................................ 40,000
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This note was uploaded on 09/29/2011 for the course AEM 3370 taught by Professor lippitt during the Spring '09 term at Cornell University (Engineering School).

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chap19n - CHAPTER 19 SOLUTIONS TO BRIEF EXERCISES BRIEF...

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