In September of 2021, Calhoun Financial Services became involved in a tax dispute with the IRS. On December 31, 2021 the tax attorney for Calhoun indicated that an unfavorable outcome to the dispute was probable. At that time, the additional taxes were estimated to be $570,000 but could be as high as $770,000. After the year-end, but before the 2021 financial statements were issued, Calhoun revised its tax liability estimate to $650,000. Calhoun should have accrued a related liability on its December 31, 2021 balance sheet that was issued on March 4, 2022: A) $0. B) $570,000. $770,000. $650,000.
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- During 2005, Tedd Co. became involved in a tax dispute with the IRS. At December 31, 2005, Tedd's tax advisor believed that an unfavorable outcome was probable. A reasonable estimate of additional taxes was $400,000 but could be as much as $600,000.After the 2005 financial statements were issued, Tedd received and accepted an IRS settlement offer of $450,000.What amount of accrued liability should Tedd have reported in its December 31, 2005 balance sheet?As of December 31, 2024, Duffy Company believed it was probable that an unfavorable outcome would result from a dispute with the Massachusetts State tax authorities. In-house tax experts estimated that Duffy would owe between $2113 - $4362 of additional taxes, with $3369 being the most likely amount. What is the journal entry, if any, that Duffy should record to reflect this in the 2024 financial statements? a. A journal entry is not booked since this is a gain contingency. b. Debit to Contingent Loss for $3369; Credit to Contingent Liability for $3369 c. Debit to Contingent Loss for $2113; Credit to Contingent Liability for $2113 d. Debit to Contingent Liability for $4362; Credit to Contingent Loss for $4362During 2020, ABC Company became involved in a tax dispute with the BIR. At December 31, 2020, ABC's tax advisor believed that an unfavourable outcome was probable and a reasonable estimate of additional taxes was P5,250,000. Before the 2020 financial statements were issued, ABC received and accepted a BIR settlement of P5,500,000. What amount of accrued liability would ABC have reported on its December 31, 2020 balance sheet?
- On April 15, 2021, the Bureau of Internal Revenue is in the process of examining Chala’s tax returns for 2018 and 2019 but has not proposed a deficiency assessment. Management feels an assessment is reasonably possible and if an assessment is made, an unfavorable settlement of up to P5,000,000 is reasonably possible. 1. Chala will accrue (disclose) in relation to the BIR examination an amount of:At December 31, 2020, Sheridan Corporation has a deferred tax asset of $180,000. After a careful review of all available evidence, it is determined that it is more likely than not that $54,000 of this deferred tax asset will not be realized.Prepare the necessary journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit CreditChris Green, CPA, is auditing Rayne Co.’s 2019 financial statements. For the year ended December 31, 2019, Rayne is applying GAAP for income taxes. Rayne’s controller, Dunn, has prepared a schedule of all differences between financial statement and income tax return income. Dunn believes that as a result of pending legislation, the enacted tax rate at December 31, 2019, will be increased for 2020. Dunn is uncertain which differences to include and which rates to apply in computing deferred taxes. Dunn has requested an overview of GAAP from Green. Required: Prepare a brief memo to Dunn from Green that identifies the objectives of accounting for income taxes, defines temporary differences, explains how to measure deferred tax assets and liabilities, and explains how to measure deferred income tax expense or benefit.
- During 2026, Raven Company became involved in a tax dispute with BIR. At December 31, 2026, Raven’s tax advisor believed that an unfavorable outcome was probable and a reasonable estimate of additional taxes was P5,000,000 but could be as much as P6,500,000. After the 2026 financial statements were issued, Raven received and accepted a BIR settlement offer of P5,500,000. Assume that the company accepted the BIR settlement offer of P5,500,000 before the 2026 financial statements were issued, what amount of accrued liability would Raven have reported in its December 31, 2026 statement of financial position?During 2019 Lian Company became involved in a tax dispute with the BIR. At December 31, 2019, Lian’s tax advisor believed that an unfavorable outcome was probable and the best estimate of additional tax was 750,000, but could be as much as 975,000. After the 2019 financial statements were issued, Leal received and accepted a BIR settlement offer of 825,000. What amount of accrued liability would Leal have reported in its December 31, 2019 statement of financial position?Sinigang na Baboy Company, a domestic corporation, started operations in the latter part of the first quarter of 2020. The company opted to report its financial statements for the nine months ended December 31, 2020. The pretax financial income for the period was P1,200,000. In preparing the income tax return for the period, the tax accountant determined the following differences between 2020 financial income and taxable income. a. Because of non-compliance with some local government requirements, the city treasurer assessed fines and penalties totaling P22,500. b. The company made a donation to Hospicio de San Jose amounting to P25,000. Tax laws consider a donation of this kind as non-deductible in full amount. c. Cash dividends received from equity investments in a domestic corporation, P5,200. d. Rent was paid in advance for one year amounting to P240,000. The financial statement of Sinigang na Baboy Company reported prepaid rent of P60,000. e. The company uses straight-line…
- A corporation filed its Annual Income Tax Return for the taxable year 2018 on April 15, 2019 together with its required attachments such as the Audited Annual Financial Statements. On March 17, 2020, the company’s accountant discovered an error for excluding a sales amounting to Php7.5M which comprises a 30% under declaration of sales. What necessary action must be done by the company in relation to its discovery?During 2020 Chua Company became involved in a tax dispute with the BIR. At December 31, 2020, Chua’s tax advisor believed that an unfavorable outcome was probable and a reasonable estimate of additional taxes was 500,000. After the 2020 financial statements were issued, Chua received and accepted a BIR settlement offer of P550,000. What amount of accrued liability would Chua have reported in its December 31, 2020 balance sheet? Group of answer choices 0 500,000 650,000 550,000A corporation filed its Annual Income Tax Return for the taxable year 2018 on April 15, 2019 together with its required attachments such as the Audited Annual Financial Statements. On March 17, 2020, the company’s accountant discovered an error for excluding a sales amounting to Php7.5M which comprises a 30% under declaration of sales. 1. What necessary action must be done by the company in relation to its discovery? 2. Assume that the company was subjected to a BIR audit or was issued a Letter of Authority (LOA) prior to the amendment of its Annual Income Tax Return, is the company allowed to make any amendment?