Student Notes, Taxes(16)

Revision of future tax rates when a change in the tax

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Revision of Future Tax Rates When a change in the tax rate is enacted, companies should record its effect on the  existing deferred income tax accounts immediately.  Tax Rate Considerations Tax Rate Changes Tax Rate Changes Tax Rate Changes Tax Rate Changes
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Chapter 19-21 Net operating loss (NOL) = tax-deductible expenses exceed  taxable revenues. The federal tax laws permit taxpayers to use the losses of one year to  offset the profits of other years.  Currently, a company may apply a loss  back 2 years (must apply the loss to the earliest year first).  Any  remaining losses are then carried forward up to 20 years.  A company  may elect to forgo a carryback and just use the loss as a carry forward.   Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-22 (Carryback and Carryforward) Zoop Inc. incurred a net operating loss of  $500,000 in 2007.  Combined income for 2005 and 2006 was $200,000 and  $200,000 respectively.  The tax rate for all years is 40%.  Zoop elects the  carryback option.  Prepare the journal entries to record the benefits of the loss  carryback and the loss carryforward. Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-23 Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-24 Journal Entries for 2007 Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-25 (Carryback and Carryforward with Valuation Allowance) Use the  information for Zoop Inc.  Assume that it is more likely than not that the  entire net operating loss carryforward will not be realized in future years.   Prepare all the journal entries necessary at the end of 2007. Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-26 Journal Entries for 2007 Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses Accounting for Net Operating Losses
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Chapter 19-27 Uncertainty in Taxes Uncertainty in Taxes Uncertainty in Taxes Uncertainty in Taxes Uncertain tax positions are recognized if it is “more likely than not”  will be sustained when challenged by the tax authority.   Measurement is the largest amount of benefit that is cumulatively  greater than 50 percent likely to be realized.   It is the highest amount that has over 50 percent likelihood of being realized.  
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Chapter 19-28 Balance Sheet Presentation
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