handout for class 7

handout for class 7 - Example: Warranty Expenses A...

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Handout #7 for Bus321-Intermediate Accounting II Professor: Yasheng Chen Notes for BUS321 Class 7: Accounting for Income Taxes Learning objectives: 1. Understand the difference between accounting income and taxable income 2. Understand the timing, temporary, and permanent difference 3. Understand why a future tax asset or a future tax liability is recognized. 4. Prepare journal entries to record income tax expenses when there are multiple temporary differences. 5. Adjust future income tax accounts in response to a tax rate change. 6. Apply accounting procedures for a tax loss carry-back and a tax loss carry- forward Key learning points: 1. Roles of accountants in tax income reporting a. GAAP b. Tax act 2. Objectives of tax accounting a. Current b. Future 3. What cause the difference between accounting income and taxable income a. Timing b. Permanent 4. Journal Entries to record timing difference: 5. Deductible Temporary Difference and Tax Assets
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Unformatted text preview: Example: Warranty Expenses A (build-in) warranty was provided on sales in 2005 and an associated expense of $500,000 was recognized in the same year. It was expected that the warranty work would be performed in subsequent years. 6. Taxable Temporary Difference and Tax Liability 1 Handout #7 for Bus321-Intermediate Accounting II Professor: Yasheng Chen Example: Installment Sales An installment sale of $300,000 in 2005 was reported as part of accounting income. For tax purpose, the sale was reported over a 3-year period at a constant amount each month as it is collected, beginning January 1, 2005. 7. Calculate future tax assets / liability when there is various tax rates in the future 8. Adjust tax assets / liabilities to reflect future tax rate change 9. Accounting for loss carryover benefits a. Example for loss carryback b. Example for loss carryforward 2...
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This note was uploaded on 03/15/2012 for the course BUS 303 taught by Professor Brown during the Spring '11 term at Simon Fraser.

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handout for class 7 - Example: Warranty Expenses A...

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