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Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:
2015 | $433,000 |
2016 | 495,000 |
2017 | 580,000 |
When calculating income, Wyhowski deducted
. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your answer is zero, enter "0". If required, round all calculations to the nearest dollar.
Year | Balance | Debit or Credit |
2015 | $fill in the blank 7 |
|
2016 | $fill in the blank 9 |
|
2017 | $fill in the blank 11 |
|
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- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.Deferred Tax Calculations (Appendix) Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows: 2015 $197,000 2016 225,000 2017 264,000 When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased January 1, 2015, at a cost of $82,000. The equipment is expected to last three years and have a(n) $7,000 salvage value. Wyhowski uses straight-line depreciation for book purposes. For tax purposes, depreciation on the equipment is $47,000 in 2015, $19,000 in 2016, and $9,000 in 2017. Wyhowski's tax rate is 35%. Required: Enter all amounts as positive numbers. 1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar. Year Taxes Paid 2015 $fill in the blank 1 2016 $fill in the blank 2 2017 $fill in the blank 3The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $100,000. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $50,000 per year for the next five years. The corporation is currently in the 35% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4
- Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows: 2015 $425,000 2016 486,000 2017 570,000 When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased on January 1, 2015, at a cost of $177,000. The equipment is expected to last three years and has a(n) $15,000 salvage value. Wyhowski uses straight-line depreciation for book purposes. For tax purposes, depreciation on the equipment is $101,000 in 2015, $41,000 in 2016, and $20,000 in 2017. Wyhowski's tax rate is 35%. Required: Enter all amounts as positive numbers. 1. How much did Wyhowski pay in income tax each year? If required, round all calculations to the nearest dollar. Year Taxes Paid 2015 $ 2016 $ 2017 $ 2. How much income tax expense did Wyhowski record each year? Year Income Tax Expense 2015 $ 2016 $ 2017 $ 3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017? If your…Assume that for a particular company the only temporary difference for tax effect accounting purposes relates to the depreciation of a newly acquired machine. The machine is acquired on 1 July 2015 at a cost of $212,000. Its useful life is considered to be 7 years, after which time it is expected to have no residual value. For tax purposes it can be fully written off over 5 years. The tax rate is assumed to be 30 per cent. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2018. Type in the answer below the correct amount. Answer:Thor, Inc reported depreciation on the income statement by the straight-line method on an asset with a four-year useful life. MACRS is used for the tax return. Income statement: $5 million each year. Tax Return: 2020 $7 million; 2021 $6 million; 2022 $4 million; 2023 $3 million. The income tax rate is 20% for all years. The current year is 2022. Which of the following statements is true regarding the differences between accounting and tax depreciation? The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is originating, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.4M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.6M. The 2022…
- ustration: Assume that during 2017 Acro Energy Inc. has income before income taxes of $800,000. During 2017, Acro discontinued and sold its unprofitable chemical division. The loss in 2017 from chemical operations (net of $60,000 taxes) was $140,000. The loss on disposal of the chemical division (net of $30,000 taxes) was $70,000. Assuming a 30% tax rate on income. Prepare Acro's statement of comprehensive income for the year ended December 31, 2017.1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2017-2020. 2. Deferral, for book purposes, of $20,000 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, $300,000. 4. Tax rate for all years, 40%. Instructions (a) Compute taxable income for 2016. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $325,000.ces Southern Atlantic Distributors began operations in January 2024 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2024, 30% in 2025, and 20% in 2026. Pretax accounting income for 2024 was $500,000, which includes interest revenue of $52,000 from municipal governmental bonds. The enacted tax rate is 25%. Assuming no differences between accounting income and taxable income other than those described above: Required: 1. Complete the following table and prepare the journal entry to record income taxes in 2024. 2. What is Southern Atlantic's 2024 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation General Journal Required 2 Complete the following table to record income taxes in 2024. Note: Amounts to be deducted should be indicated with a minus sign. Enter your…
- On January 1, 2022, Gore, Inc. purchased a machine for €720,000 which will be depreciated €72,000 per year for financial statement reporting purposes. For income tax reporting, Gore elected to expense €80,000 and to use straight-line depreciation which will allow a depreciation deduction of €64,000 for 2022. Assume a present and future enacted income tax rate of 30%. What amount should be added to Gore's deferred tax liability for this temporary difference at December 31, 2022?At the beginning of 2015, Pitman Co. purchased as asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $200,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 40% for 2015 and all future years. At the end of 2015, what are the book basis and the tax basis of the asset? Book basis Tax basis a. 1,000,000 620,000 b. 980,000 620,000 c. 980,000 720,000 d. 1,000,000 720,000 At the end of 2015. which of the following deferred tax accounts and balances is reported on Pitman's balance sheet? Account Balance a. Deferred tax asset 136,000 b. Deferred tax liability 136,000 c. Deferred tax asset 112,000 d. Deferred tax liability 112,000QUESTION Dragon Lord Bhd recognised a deferred tax liability for the year ended 31 December 2017 which is related solely to a difference between rates of capital allowance and depreciation. The carrying amount of plant and equipment was RM30,000,000 and tax written down value was RM20,000,000. The following transaction took place during 2018: During the year, plant was revalued and surplus was RM6,000,000. At the end of the year, the carrying amount of plant was RM42,000,000 and tax written down was RM25,000,000. Gains on revaluation are taxable on sale at 20%. Development expenditure of RM12,000,000 was capitalised in accordance with MFRS 138 but is deducted for tax purpose. There was no amortisation during the year. Dragon Lord Bhd has recognised income receivable of RM2,000,000 but only RM1,500,000 has been received yet. Dragon Lord Bhd has made provision for environment clean-up of RM1,000,000. The expenditure will be tax deductible when paid only. The trade receivables were…