xercise 16-3 At the end of 2015, Mathis Industries had a deferred tax eferred ta
ID: 2601708 • Letter: X
Question
xercise 16-3 At the end of 2015, Mathis Industries had a deferred tax eferred tax asset; million attributable to a temporary book-tax difference of $300 million in a liability for nestimated expenses. At the end of 2016, the temporary difference is $280 million. Mathis has asset account with a balance of $120 cable income ven; previous lance in luation owance D16-2 LO16-3 xt: E 16-11 ther temporary differences. Taxable income for 2016 is $720 million and the tax rate is no o 40% Mathis has a valuation allowance of $40 million for the deferred tax asset at the beginning of 2016. Required: 1. Prepare the journal entry(s) to record Mathis's income taxes for 2016 assuming it is "more likely than not" that the deferred tax asset will be realized. 2. Prepare the journal entry(s) to record Mathis's income taxes for 2016 assuming it is "more likely than not" that one-half of the deferred tax asset will not ultimately be realized. Exercise 16-4 Multiple differences; calculate taxable income LO16-1 LO16-4 Text: E 16-13 Fessler Transport beganonerations in January 2016, and purchased a delivery truck for $160,000. Fessler plasstraight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2016, 30% in 2017 and 20% in 2018, Pretax accounting income for 2016 was $900,000, which includes interest revenue of $160,000 from municipal bonds. The enacted tax rate is 40%. Required: Assu described above: ming no differences between accounting income and taxable income other than those Required: 1. Prepare the journal entry to record income taxes in 2016. 2. What is Fessler's 2016 net income?Explanation / Answer
1) Journal Entry:
Particulars
Debit
Credit
Income tax expense
296
Deferred tax assets
8
Income tax payable
288
Valuation allowance—Deferred tax asset
40
Income tax expense
40
Calculation for Valuation allowance deferred tax asset:
Temporary Difference in the beginning of the year
300
Temporary Difference at the end of the year
280
Decrease in temporary difference
20
Tax Rate
40%
Deferred tax assets (unfavourable)
8
2)
Particulars
Debit
Credit
Income tax expense
296
Deferred tax assets
8
Income tax payable
288
Valuation allowance—Deferred tax asset
44
Income tax expense
44
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Particulars
Debit
Credit
Income tax expense
296
Deferred tax assets
8
Income tax payable
288
Valuation allowance—Deferred tax asset
40
Income tax expense
40
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