Sherrod, Inc., reported pretax accounting income of $68 millionfor 2016. The following information relates to differences betweenpretax accounting income and taxable income:
a. Income from installment sales of properties included in pretaxaccounting income in 2016 exceeded that reported for tax purposesby $6 million. The installment receivable account at year-end had abalance of $8 million (representing portions of 2015 and 2016installment sales), expected to be collected equally in 2017 and2018.
b. Sherrod was assessed a penalty of $4 million by theEnvironmental Protection Agency for violation of a federal law in2016. The fine is to be paid in equal amounts in 2016 and 2017.
c. Sherrod rents its operating facilities but owns one assetacquired in 2015 at a cost of $56 million. Depreciation is reportedby the straight-line method assuming a four-year useful life. Onthe tax return, deductions for depreciation will be more thanstraight-line depreciation the first two years but less thanstraight-line depreciation the next two years ($ in millions)
. 2. What is the 2016 net income? (Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5)
3. Show how any deferred tax amounts should be classified andreported in the 2016 balance sheet.(Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5))
Sherrod, Inc., reported pretax accounting income of $68 millionfor 2016. The following information relates to differences betweenpretax accounting income and taxable income: |
a. | Income from installment sales of properties included in pretaxaccounting income in 2016 exceeded that reported for tax purposesby $6 million. The installment receivable account at year-end had abalance of $8 million (representing portions of 2015 and 2016installment sales), expected to be collected equally in 2017 and2018. |
b. | Sherrod was assessed a penalty of $4 million by theEnvironmental Protection Agency for violation of a federal law in2016. The fine is to be paid in equal amounts in 2016 and 2017. |
c. | Sherrod rents its operating facilities but owns one assetacquired in 2015 at a cost of $56 million. Depreciation is reportedby the straight-line method assuming a four-year useful life. Onthe tax return, deductions for depreciation will be more thanstraight-line depreciation the first two years but less thanstraight-line depreciation the next two years ($ in millions) |
. | 2. What is the 2016 net income? (Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5)
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