Study Guides (238,122)
Accounting (46)
ACCTG415 (9)
Jason Lee (9)
Quiz

# Quiz #2 (2013 Winter, Solutions).docx

5 Pages
136 Views

School
University of Alberta
Department
Accounting
Course
ACCTG415
Professor
Jason Lee
Semester
Winter

Description
ACCTG 415 - Solutions for Quiz #2 (2013, Winter) Question 1 (12 marks) A. 5 marks The first year available for the loss carryback is 2010. Year Tax Refund Unused Loss 2010 1,700,000 × 30% = 510,000 5,200,000 – 1,700,000 = 3,500,000 2011 1,100,000 × 35% = 385,000 3,500,000 – 1,100,000 = 2,400,000 2012 600,000 × 35% = 210,000 2,400,000 – 600,000 = 1,800,000 \$1,105,000 After carrying the loss back over 3 years, the firm still has an unused amount of \$1,800,000 that it can carry forward for up to 20 years. This unused loss gives rise to a potential future tax benefit of \$630,000 (= 1,800,000 × 35%). Because it is probable that the firm will realize this deferred (future) tax benefit, it is recognized in 2013. To record the tax refund: Income tax refund receivable 1,105,000 Current income tax benefit (due to loss carryback) 1,105,000 To record the deferred income tax benefit: Deferred income tax asset 630,000 Deferred income tax benefit (due to loss carryforward) 630,000 B. 3 marks Loss before income taxes \$(5,200,000) Income tax benefit Current income tax benefit 1,105,000 Deferred income tax benefit 630,000 1,735,000 1 Net loss \$(3,465,000) C. 4 marks The firm carries the loss back over 3 years first and will receive a tax refund of \$1,105,000, as shown in Requirement A. Then, the firm can carry the unused amount of \$1,800,000 forward for up to 20 years. This unused loss gives rise to a potential deferred tax benefit of \$630,000 (= 1,800,000 × 35%). The firm determined that it is more likely than not that 40% of the benefit will not be realized. Thus, it first recognizes the future tax benefit of \$630,000. Then, it uses an offsetting valuation allowance account to reduce the net benefit to the amount expected to be realized (= 630,000 – 630,000 × 40% = 630,000 – 252,000 = 378,000). To record future income tax benefit: Future income tax asset 630,000 Future income tax benefit (due to loss carryforward) 630,000 To reduce the benefit to the expected amount: Future income tax expense 252,000 Valuation allowance 252,000 2 Question 2 (26 marks) A. (5 marks) Pension Benefit Obligation (PBO): PBO, Jan. 1 \$32,000,000 Current service cost 6,500,000 Interest on outstanding PBO (= 41,200,000×10%) 4,120,000 Past service cost 7,000,000 Benefits paid to retirees (2,100,000) Actuarial loss on PBO 1,159,000 PBO, Dec. 31 \$48,679,000 PBO outstanding = PBO, Jan. 1
More Less

Related notes for ACCTG415

OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.