B Co. reported a deferred tax liability of $22.4 million for theyear ended December 31, 2015, related to a temporary difference of$56 million. The tax rate was 40%. The temporary difference isexpected to reverse in 2017 at which time the deferred taxliability will become payable. There are no other temporarydifferences in 2015â2017. Assume a new tax law is enacted in 2016that causes the tax rate to change from 40% to 30% beginning in2017. (The rate remains 40% for 2016 taxes.) Taxable income in 2016is $86 million.
Required: Determine the effect of the change and prepare theappropriate journal entry to record Bâs income tax expense in 2016.(If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).)
B Co. reported a deferred tax liability of $22.4 million for theyear ended December 31, 2015, related to a temporary difference of$56 million. The tax rate was 40%. The temporary difference isexpected to reverse in 2017 at which time the deferred taxliability will become payable. There are no other temporarydifferences in 2015â2017. Assume a new tax law is enacted in 2016that causes the tax rate to change from 40% to 30% beginning in2017. (The rate remains 40% for 2016 taxes.) Taxable income in 2016is $86 million.
Required: Determine the effect of the change and prepare theappropriate journal entry to record Bâs income tax expense in 2016.(If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).)
Related questions
In 2016, Ryan Management collected rent revenue for 2017 tenantoccupancy. For financial reporting, the rent is recorded asdeferred revenue and then recognized as income in the periodtenants occupy rental property. But for income tax reporting it istaxed when collected. The deferred portion of the rent collected in2016 was $80 million. Taxable income is $260 million. No temporarydifferences existed at the beginning of the year, and the tax rateis 40%. Suppose the deferred portion of the rent collected was $70million at the end of 2017. Taxable income is $280 million. |
Prepare the appropriate journal entry to record income taxes.(If no entry is required for a particular event, select "Nojournal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).) |
Fores Construction Company reported a pretax operating loss of$250 million for financial reporting purposes in 2016. Contributingto the loss were (a) a penalty of $15 million assessed by theEnvironmental Protection Agency for violation of a federal law andpaid in 2016 and (b) an estimated loss of 10 million from accruinga loss contingency. The loss will be tax deductible when paid in2017. The enacted tax rate is 40%. There were no temporarydifferences at the beginning of the year and none originating in2016 other than those described above. Taxable income in Foresâstwo previous years of operation was as follows:
2014- $130 million
2015- 75 million
| Required: |
| 1. | Prepare the journal entry to recognize the income tax benefit ofthe net operating loss in 2016. Fores elects the carryback option.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).) 2. What is the net operating loss reported in 2016income statement (Enter your answers in millions (i.e., 10,000,000should be entered as 10).) 3. Prepare the journal entry to record income taxes in2017 assuming pretax accounting income is $115 million. Noadditional temporary differences originate in 2017. |
At the end of 2015, Payne Industries had a deferred tax assetaccount with a balance of $30 million attributable to a temporarybookâtax difference of $75 million in a liability for estimatedexpenses. At the end of 2016, the temporary difference is $70million. Payne has no other temporary differences and no valuationallowance for the deferred tax asset. Taxable income for 2016 is$225 million and the tax rate is 40%. |
| Required: | |
| 1. | Prepare the journal entry(s) to record Payneâs income taxes for2016, assuming it is more likely than not that the deferred taxasset will be realized. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field. Enter your answers in millions (i.e., 10,000,000should be entered as 10).) |
| 2. | Prepare the journal entry(s) to record Payneâs income taxes for2016, assuming it is more likely than not that one-fourth of thedeferred tax asset will ultimately be realized. (If noentry is required for a transaction/event, select "No journal entryrequired" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).) |
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