ACCT20002 Lecture Notes - Lecture 8: Deferred Tax, Corporate Tax, Book Value

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pinkporcupine846

7 Sep 2018

School

University of Melbourne

Department

Accounting

Course

ACCT20002

Professor

All

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Document Summary

Tax payable approach - no longer used: calculate tax liability via: Taxable income x corporate tax rate (currently 30%: adjusting journal entry to raise expense and liability: Cr income tax payable (l: so, a company with taxable income of m would make the above adjusting entry of k. Ignores the di erences between accounting pro t and taxable pro t. Tax-e ect accounting - new approach: the method prescribed by aasb 112, methodology: Account for di erences via the balance sheet: also known as the balance sheet approach, para 5 makes the following distinction: Accounting pro t is pro t or loss for a period before deducting tax expense. Taxable pro t (tax loss) is the pro t (loss) for a period, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable (recoverable: requires the preparation of 2 worksheets: Current tax worksheet - to calculate the current tax payable.

Related Questions

I have a question. I got right Deferred Tax Asset and $12,350Income Tax Payable $173,740 but I got wrong Income Tax Expense andDeferred tax liability.
Bridgeport Inc. has two temporary differences at the end of 2016.The first difference stems from installment sales, and the secondone results from the accrual of a loss contingency. Bridgeportâsaccounting department has developed a schedule of future taxableand deductible amounts related to these temporary differences asfollows.

	2017	2018	2019	2020
Taxable Amounts	42,700	45,900	64,300	81,400
Deductible Amounts		(13,600)	(18,900)
TOTALS	42,700	32,300	45,400	81,400

As of the beginning of 2016, the enacted tax rate is 34% for2016 and 2017, and 38% for 2018â2021. At the beginning of 2016, thecompany had no deferred income taxes on its balance sheet. Taxableincome for 2016 is $511,000. Taxable income is expected in allfuture years.

Prepare the journal entry to record income tax expense, deferredincome taxes, and income taxes payable for 2016.

blackelephant991

The tax rate is 30%

Cougar has pretax accounting income (PAI) of $66,000 in 2016after including the effects of the appropriate items from thefollowing information:

MACRS (tax) depreciation $20,000

Officerâs life insurance premium expense $15,000

Interest revenue on municipal bonds $25,000

Depreciation taken for financial reporting purposes $38,000

Actual product warranty costs deducted for tax purposes$20,000

Excess of accrual-basis financial accounting sales overcash-basis

sales recognized for tax purposes $11,000

Estimated product warranty expense for financial reporting

Purposes $27,000

At the beginning of 2016, Cougar had a deferred tax liability(DTL) balance of $17,250 which reflected a $41,800 taxabletemporary difference related to depreciation and another $15,700taxable temporary difference related to accrual-basis salesdifferences. Cougar had a deferred tax asset (DTA) balance of$14,850 related to a $49,500 deductible temporary differenceresulting from a warranty liability (obligation under warranty)balance at the beginning of the year. The tax rate for 2016 is 30%,but during 2016, Congress changed the enacted tax rate to 34% forall future tax years beginning in 2017.

Required:

1) Compute Cougarâs taxable income for 2016. What are incometaxes payable for 2016?

2) Prepare Cougarâs journal entry to record income tax expensefor 2016 (assume no

valuation allowance existed as of the beginning of the year andis unnecessary at the end

of the year).

3) What is Cougarâs effective tax rate?

ochrebeaver163