The following information has been obtained for Swifty Corporation. 1. 2. 3. 4. 5. 6. 7. Prior to 2020, taxable income and pretax financial income were identical. Pretax financial income is $1,764,000 in 2020 and $1,372,000 in 2021. On January 1, 2020, equipment costing $1,160,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) Interest of $60,000 was earned on tax-exempt municipal obligations in 2021. Included in 2021 pretax financial income is a gain on discontinued operations of $181,000, which is fully taxable. The tax rate is 20% for all periods. Taxable income is expected in all future years.

The following information has been obtained for Swifty Corporation. 1. 2. 3. 4. 5. 6. 7. Prior to 2020, taxable income and pretax financial income were identical. Pretax financial income is $1,764,000 in 2020 and $1,372,000 in 2021. On January 1, 2020, equipment costing $1,160,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) Interest of $60,000 was earned on tax-exempt municipal obligations in 2021. Included in 2021 pretax financial income is a gain on discontinued operations of $181,000, which is fully taxable. The tax rate is 20% for all periods. Taxable income is expected in all future years.

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 12P: Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax...

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At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
Comprehensive Colt Company reports pretax financial income of 143,000 in 2019. In addition to pretax income from continuing operations (of which revenues are 295,000), the following items are included in this pretax income: Colts taxable income totals 93,000 in 2019. The difference between the pretax financial income and the taxable income is due to the excess of tax depreciation over financial depreciation on assets used in continuing operations. At the beginning of 2019, Colt had a retained earnings balance of 310.000 and a deferred tax liability of 8,100. During 2019, Colt declared and paid dividends of 48,000. It is subject to tax rates of 15% on the first 50,000 of income and 30% on income in excess of 50,000. Based on proper interperiod tax allocation procedures, Colt has determined that its 2019 ending deferred tax liability is 14,100. Required: 1. Prepare a schedule for Colt to allocate the total 2019 income tax expense to the various components of pretax income. 2. Prepare Colts income tax journal entry at the end of 2019. 3. Prepare Colts 2019 income statement. 4. Prepare Colts 2019 statement of retained earnings. 5. Show the related income tax disclosures on Colts December 31, 2019, balance sheet.
The following information has been obtained for Tamarisk Corporation. 1. Prior to 2020, taxable income and pretax financial income were identical. 2. Pretax financial income is $1,575,000 in 2020 and $1,425,000 in 2021. 3. On January 1, 2020, equipment costing $1,200,000 is purchased. It is to be depreciated on a straight-line basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.) 4. Interest of $54,000 was earned on tax-exempt municipal obligations in 2021. 5. Included in 2021 pretax financial income is a gain on discontinued operations of $183,000, which is fully taxable. 6. The tax rate is 20% for all periods. 7. Taxable income is expected in all future years.
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