AC302-Unit5ExcelTemplate

AC302-Unit5ExcelTemplate - E19-5 Valuation Account At the...

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At the end of 2010, its first year of operations, the Beattie Company reported taxable income of $38,000 and pretax financial income of $34,400. The difference is due to the way the company handles its warranty costs. For tax purposes, the company deducts the warranty costs as they are paid. For financial reporting purposes, the company provides provides for a year-end estimated warranty liability based on future expected costs. The company is subject to a 30% tax rate for 2010 and no change in the tax rate has been enacted for future years. Based on verifiable evidence, the company decides it should establish a valuation allowance of 60% of its ending deferred tax asset. Required 1. Prepare the income tax journal entry of the Beattie Company at the end of 2010. 2. Prepare the lower portion of the Beattie Company’s 2010 income statement. E19-5 Valuation Account
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Name: An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required 1. Prepare the income tax journal entry of the Beattie Company at the end of 2010. December 31, 2010 December 31, 2010 2. Prepare the lower portion of the Beattie Company’s 2010 income statement. Income before income taxes Income tax expense Net Income E19-5 Valuation Account
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Name: Solutions An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required 1. Prepare the income tax journal entry of the Beattie Company at the end of 2010. December 31, 2010 Income Tax Expense 10,320 Deferred Tax Asset 1,080 Income Taxes Payable 11,400 December 31, 2010 Income Tax Expense 648 Allowance to Reduce Deferred Tax Asset 648 2. Prepare the lower portion of the Beattie Company’s 2010 income statement. Income before income taxes $34,400 Income tax expense (10,968) Net Income $23,432 E19-5 Valuation Account
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Vickers Company reports taxable income of $4,500 for 2010. The company has two temporary differences between pretax financial income and taxable income at the end of 2010. The first difference is expected to result in taxable amounts totaling $2,470 in future years. The second difference is expected to result in deductible amounts totaling $1,360 in future years. The company has a deferred tax asset of $372 and a deferred tax liability of $690 at the beginning of 2010. The current tax rate is 30% and no change in the tax rate has been enacted for future years. The company has positive, verifiable evidence of future taxable income.
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