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Question 26
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Deferred Tax
Temporary Difference
Future Taxable
(Deductible) Amounts
Tax Rate
(Asset)
Liability
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Question 26
Differences between accounting and taxable income and the effect on deferred taxes.The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2014, its first year of operations. The enacted income tax rate is 30% for all years.
Pretax accounting income $660,000 Excess tax depreciation (344,000) Litigation accrual 66,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 56,000 Interest income from New York municipal bonds (16,000) Taxable income $422,000 1. Excess tax depreciation will reverse equally over a four-year period, 2015-2018. 2. It is estimated that the litigation liability will be paid in 2018. 3. Rent revenue will be recognized during the last year of the lease, 2018. 4. Interest revenue from the New York bonds is expected to be $16,000 each year until their maturity at the end of 2018.
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Explanation / Answer
1) A schedule of future taxable and (deductible) amounts
2) A schedule of the deferred tax (asset) and liability at the end of 2014.
Future Taxable
(Deductible) Amounts
3) Net deferred tax expense:
Deferred tax epenses $ 103,200
Less: Deferred tax benefit $ ( 36,600)
Net deferred tax expenses $ 66,600
4) The journal entry to record income tax expense, deferred taxes, and the income taxes payable for 2014.
2015 2016 2017 2018 Total Future taxable (deductible) amounts: Depreciation $86,000 $86,000 $86,000 $86,000 $344,000 Litigation $(66,000) $(66,000) Unearned Rent $(56,000) $(56,000)Related Questions
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