Posted: February 9th, 2015

Intermediate Accounting

Paper, Order, or Assignment Requirements

Task 5.2
Temporary differences

Instructions:

1. Work the following exercises of Chapter 19 of the E-book Kieso, DE, Weygandt, JJ, & Warfield, TD (2010). Intermediate accounting (13th ed.). Hoboken, NJ: Wiley.

a. E19-1 (p.1031) (Temporary Difference, amount of future tax, 12 points)
b. E19-2 (p.1031) (temporary differences, amount of future tax, 12 points)
c. P19-1 (p.1039) (Three differences, multiple ratios, 16 points)

2. You must submit answers to the exercises in full.
3. Save the task in Excel format

Task 5.2

Temporary differences

Instructions:

1. Work the following exercises of Chapter 19 of the E-book Kieso, DE, Weygandt, JJ, & Warfield, TD (2010). Intermediate accounting (13th ed.). Hoboken, NJ: Wiley.

a. E19-1 (p.1031) (Temporary Difference, amount of future tax, 12 points)
b. E19-2 (p.1031) (temporary differences, amount of future tax, 12 points)
c. P19-1 (p.1039) (Three differences, multiple ratios, 16 points)

2. You must submit answers to the exercises in full.
3. Save the task in Excel format

Exercises:

E19-1 (One Temporary Difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) Starfleet Corporation has one temporary difference at the end of 2010 that will reverse and cause taxable amounts of $55,000 in 2011, $60,000 in 2012, and $75,000 in 2013. Starfleet’s pretax financial income for 2010 is $400,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2010.

Instructions

(a)Compute taxable income and income taxes payable for 2010.

(b)Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010.

(c) Prepare the income tax expense section of the income statement for 2010, beginning with the line “Income before income taxes.”

E19-2 (Two Differences, No Beginning Deferred Taxes, Tracked through 2 Years) The following in- formation is available for McKee Corporation for 2010.

1. Excess of tax depreciation over book depreciation, $40,000. This $40,000 difference will reverse equally over the years 2011–2014.
2. Deferral, for book purposes, of $25,000 of rent received in advance. The rent will be earned in 2011.
3. Pretax financial income, $350,000.
4. Tax rate for all years, 40%.

Instructions

(a)Compute taxable income for 2010.

(b)Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010.

(c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2011, assuming taxable income of $325,000.

P19-1 (Three Differences, No Beginning Deferred Taxes, and Multiple Rates) the following information is available for Remmers Corporation for 2010.

1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $120,000. This difference will reverse in equal amounts of $30,000 over the years 2011–2014.
2. Interest received on municipal bonds was $10,000.
3. Rent collected in advance on January 1, 2010, totaled $60,000 for a 3-year period. Of this amount, $40,000 was reported as unearned at December 31, for book purposes.
4. The tax rates are 40% for 2010 and 35% for 2011 and subsequent years.
5. Income taxes of $320,000 are due per the tax return for 2010.
6. No deferred taxes existed at the beginning of 2010.

Instructions

(a)Compute taxable income for 2010.

(b)Compute pretax financial income for 2010.

(c) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2010 and 2011. Assume taxable income was $980,000 in 2011.

(d)Prepare the income tax expense section of the income statement for 2010, beginning with “Income before income taxes.”