Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses: Revenues Expenses 2017 $253,000 $180,000 2018 241,000 196,000
Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses: Revenues Expenses 2017 $253,000 $180,000 2018 241,000 196,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 9MC: Brooks Company reported a prior period adjustment of 512,000 in pretax financial "income" and...
Related questions
Question
Ross Company has been in business for several years, during which time it has been profitable. For each of those years, Ross reported (and paid taxes on) taxable income in the same amount as pretax financial income based on the following revenues and expenses:
|
Revenues
|
Expenses
|
2017 | $253,000 | $180,000 |
2018 | 241,000 | 196,000 |
Ross was subject to the following income tax rates during this period: 2017, 30%; and 2018, 25%. During 2019, Ross experienced a severe decrease in the demand for its products. The company tried to offset this decrease with an expensive marketing campaign, but was unsuccessful. Consequently, at the end of 2019, Ross determined that its revenues were $60,000 and its expenses were $193,000 for both income taxes and financial reporting.
At the end of 2019 due to increasing competition, Ross deemed that it was more likely than not that 50% of the future deductible amount will not be realized. The income tax rate was 21% for the entire period, and no change in the tax rate had been enacted for future years.
In 2020, Ross developed and introduced a new product that proved to be in high demand. For 2020, Ross reported revenues of $181,000 and expenses of $155,000 for both income taxes and financial reporting. The applicable income tax rate was 21%.
Required:
1. | Prepare Ross’s income tax journal entries at the end of 2019. |
2. | Prepare Ross’s 2019 income statement. Include a note for any operating loss carryforward. |
3. | Prepare the income tax |
4. | Prepare Ross’s 2020 income statement. |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 9 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning