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Chapter 19: Q8IFRS (page 1114)
Use the information for Rode Inc. given in IFRS19-7. Assume that it is probable that the entire net operating loss carryforward will not be realized in future years. Prepare the journal entry(ies) necessary at the end of 2017.
Income tax refund receivable is $140,000.
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Crosley Corp. sold an investment on an installment basis. The total gain of \(60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one-third of the sale price is collected in the period of sale. The tax rate was 40% in 2017, and 35% in 2018 and 2019. The 35% tax rate was not enacted in law until 2018. The accounting and tax data for the 3 years is shown below. Financial Tax Accounting Return 2017 (40% tax rate) Income before temporary difference \) 70,000 \(70,000 Temporary difference 60,000 20,000 Income \)130,000 \(90,000 2018 (35% tax rate) Income before temporary difference \) 70,000 \(70,000 Temporary difference 鈥�0鈥� 20,000 Income \) 70,000 \(90,000 2019 (35% tax rate) Income before temporary difference \) 70,000 \(70,000 Temporary difference 鈥�0鈥� 20,000 Income \) 70,000 $90,000 Instructions (a) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable at the end of each year. No deferred income taxes existed at the beginning of 2017. (b) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (c) Draft the income tax expense section of the income statement for each year, beginning with 鈥淚ncome before income taxes.鈥�
Beilman Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2015 $120,000 40% 2016 90,000 40 2017 (280,000) 45 2018 120,000 45 The tax rates listed were all enacted by the beginning of 2015.Instructions (a) Prepare the journal entries for years 2015鈥�2018 to record income tax expense (benefit) and income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carryforward will not be realized. (b) Prepare the income tax section of the 2017 income statement beginning with the line 鈥淥perating loss before income taxes.鈥� (c) Prepare the income tax section of the 2018 income statement beginning with the line 鈥淚ncome before income taxes.鈥�
Jennifer Capriati Corp. has a deferred tax asset account with a balance of \(150,000 at the end of 2016 due to a single cumulative temporary difference of \)375,000. At the end of 2017, this same temporary difference has increased to a cumulative amount of \(450,000. Taxable income for 2017 is \)820,000. The tax rate is 40% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2016. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized. (b) Assuming that it is more likely than not that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2017 to record the valuation account.
: Describe the current convergence efforts of the FASB and IASB in accounting for taxes.
The asset-liability approach for recording deferred income taxes is an integral part of generally accepted accounting principles. (b) Discuss the nature of the deferred income tax accounts and the manner in which these accounts are to be reported on the balance sheet.
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