Class%2B2%2BTG%2B-Problems - UGBA 120B: Section 2 TAXES...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
UGBA 120B: Section 2 TAXES Eric Desai
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Multiple choice c. The deferred tax liability is recognized at the rate anticipated in the period when the temporary difference reverses. Therefore, the deferred tax liability is $12,000 × 25% or $3,000.
Background image of page 2
Multiple choice b. The annual rent of $36,000 is taxable in 2009 but only $18,000 is considered rental income for financial purposes. This creates a temporary difference of $18,000 which will be taxed at the future enacted tax rate of 40%. Therefore, the deferred tax asset at December 31, 2009 is $7,200 ($18,000 × 40%).
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Multiple choice c. Total income tax expense is the total of the two journal entries or $10,000
Background image of page 4
Multiple choice a. The nondeductible book expenses are permanent differences and do not affect taxes. The temporary depreciation difference ($25,000) times the enacted future tax rate (35%) will be the deferred tax liability on the December 31, 2009 balance sheet ($25,000 × 35% = $8,750 deferred tax liability).
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Multiple choice d. $95,000. Deferred taxes are calculated using future enacted tax rates Year Temporary Differences × Enacted Tax Rates = Deferred Tax Asset 2010 $100,000 × 30 % = $30,000 2011 $ 50,000 × 30 % = 15,000 2012 $ 50,000 × 30 % = 15,000 2013 $100,000 × 35 % = 35,000 Total Deferred Tax Asset $95,000
Background image of page 6
Multiple choice c. The tax benefit of loss carryback would be $40,000 ($100,000 × 40%) and would result in a tax refund for 2008. The other $100,000 of the loss would be carried forward to offset a portion of the 2009 income. The tax liability would be the 2009 pretax income of $400,000 less the loss carryforward of $100,000 times the 40% tax rate for a total liability of $120,000.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Multiple choice a. Only an extraordinary item requires intraperiod allocation of income tax. "Interest income on municipal obligations" results in a permanent difference, and "Estimated expenses for major repairs. .." and "Rental income included in income for income tax purposes" result in temporary differences
Background image of page 8
Additional exercises Exercise 16-1 Stancil Industries reports pretax accounting income of $80 million, but due to a single temporary difference, taxable income is only $50 million. At the beginning of the year, no temporary differences existed. Required:
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 18

Class%2B2%2BTG%2B-Problems - UGBA 120B: Section 2 TAXES...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online