Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 17, Problem 17.9BE
a.
To determine
The book basis of the installment sales receivable.
Given information:
Total sales for the current year are $450,000.
Sales on installment are $120,000.
Operating expenses are $180,000 for both GAAP and tax reporting.
b.
To determine
The tax basis of the installment sales receivable.
Given information:
Total sales for the current year are $450,000.
Sales on installment are $120,000.
Operating expenses are $180,000 for both GAAP and tax reporting.
c.
To determine
The income tax payable, income tax provision and the deferred tax provision for the current year.
Given information:
Total sales for the current year are $450,000.
Sales on installment are $120,000.
Operating expenses are $180,000 for both GAAP and tax reporting.
Tax rate is 40%.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Karma Inc. has installment sales to customers and recognizes the full installment sales as revenues for accounting purposes although it receives cash payments from customers in later periods. For tax purposes, the installment sales are taxable when cash payments are received. Amounts for pretax accounting income which included the installment sales, installment sales reported on income statement, and cash payments received from installment sales in year 1, year 2, and year 3 are as follows:
Year 1 Year 2 Year 3
Pretax accounting Income $800,000 $500,000 $600,000
Installment sales income on 200,000 0 0
income statement
Cash payments received from 80,000 50,000 70,000
installment…
Tetra Corp, an IFRS reporter, has the deferred tax assets and liabilities presented below:
Item
Classification on the Balance Sheet of Related Account
Deferred Tax Associated with Item
Excess of warranty expense over warranty deductions
Current
$69,000 Asset
Accelerated depreciation for tax purposes
Noncurrent
$79,000 Liability
Installment sales receivable
Current
$39,000 Liability
Contingent liability
Current
$29,000 Asset
What will the company report for deferred taxes on the balance sheet?
Group of answer choices
noncurrent assets: deferred tax asset $20,000
noncurrent liabilities: deferred tax liability $20,000
current assets: deferred tax asset $59,000; noncurrent liabilities: deferred tax liability $79,000
Companies do not report deferred taxes on the balance sheet under IFRS.
(Accounting and Classification of Deferred Income Taxes)Part A: This year, Gumowski Company has each of the following items in its income statement.1. Gross profits on installment sales.2. Revenues on long-term construction contracts.3. Estimated costs of product warranty contracts.4. Premiums on officers’ life insurance policies with Gumowski as beneficiary.Instructions(a) Indicate where deferred income taxes are reported in the financial statements.(b) Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition.
Part B: Gumowski Company’s president has heard that deferred income taxes can be classified in different ways in the balance sheet.
InstructionsIdentify the conditions under which deferred income taxes would be classified as a noncurrent item in the balance sheet. What justification exists for such classification?
Chapter 17 Solutions
Intermediate Accounting
Ch. 17 - Prob. 17.1QCh. 17 - When will income tax expense and income taxes...Ch. 17 - Will permanent differences cause the effective tax...Ch. 17 - When do permanent differences arise?Ch. 17 - How are deferred tax assets and deferred tax...Ch. 17 - Prob. 17.6QCh. 17 - Prob. 17.7QCh. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - How does a firm determine the need for a valuation...
Ch. 17 - Prob. 17.11QCh. 17 - Prob. 17.12QCh. 17 - Prob. 17.13QCh. 17 - How does an entity account for uncertain tax...Ch. 17 - Prob. 17.15QCh. 17 - Prob. 17.16QCh. 17 - Do U.S. GAAP and IFRS classify deferred tax...Ch. 17 - Prob. 17.18QCh. 17 - Cavan Company prepared the following...Ch. 17 - Prob. 17.2MCCh. 17 - Prob. 17.3MCCh. 17 - Prob. 17.4MCCh. 17 - Prob. 17.5MCCh. 17 - Prob. 17.6MCCh. 17 - Prob. 17.7MCCh. 17 - Prob. 17.1BECh. 17 - Income Taxes Payable. Limmox Company has...Ch. 17 - Permanent Differences. Simmox Company's income...Ch. 17 - Permanent Differences. Plimmox Company's income...Ch. 17 - Permanent Differences, Reconciliation of Statutory...Ch. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Temporary Differences, Deferred Tax Liability....Ch. 17 - Temporary Differences. Deferred Tax Asset....Ch. 17 - Temporary Differences, Deferred Tax Asset. Using...Ch. 17 - Prob. 17.14BECh. 17 - Realizability of Deferred Assets. Maves, Inc....Ch. 17 - Prob. 17.16BECh. 17 - Prob. 17.17BECh. 17 - Prob. 17.18BECh. 17 - Prob. 17.19BECh. 17 - Prob. 17.20BECh. 17 - Prob. 17.21BECh. 17 - Prob. 17.22BECh. 17 - Prob. 17.23BECh. 17 - Prob. 17.24BECh. 17 - Prob. 17.25BECh. 17 - Prob. 17.26BECh. 17 - Prob. 17.27BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Change in Tax Rates, Permanent Difference,...Ch. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - Net Operating Loss, Carryback. Phlash Photo Labs,...Ch. 17 - Net Operating Loss, Carryforward. Loggins Lumber...Ch. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Net Operating Loss, Carryforward, Tax Rate Change....Ch. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Uncertain Tax Positions. Lewis Eagle Corporation...Ch. 17 - Uncertain Tax Positions. Based on the information...Ch. 17 - Prob. 17.21ECh. 17 - Prob. 17.1PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.3PCh. 17 - Prob. 17.4PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.6PCh. 17 - Prob. 17.7PCh. 17 - Prob. 17.8PCh. 17 - Prob. 17.9PCh. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Permanent Differences, Temporary Tax Differences,...Ch. 17 - Prob. 1JCCh. 17 - Prob. 2JCCh. 17 - Prob. 1FSACCh. 17 - Prob. 1SSCCh. 17 - Prob. 2SSCCh. 17 - Prob. 3SSCCh. 17 - Scene 1: The concept of the deferred tax liability...Ch. 17 - Basis for Conclusions Case 2: Uncertain Tax...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Pumpkin Company recorded Income tax payable equal to $10M, increased the Deferred Tax Asset by $2M, and increased the Deferred Tax Liability by $3M. Accounting income before taxes is equal to $50M. What amount of Net Income will Maxie report on its income statement? O $45M. O $39M. O $49M. O $46M.arrow_forwardThis year AB Company has each of the following items in its income statement. Part A. Gross profit on instalment sales Revenues on long term construction contracts Estimated costs of product warranty contracts Premiums on officers’ life insurance policies as AB Company as beneficiary. Instructions: (a) Under what conditions would deferred income taxes need to be reported in the financial statements? (b) Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition. Part B. AB Company’s president has heard that deferred income taxes can be classified in different ways in the balance sheet. Instructions: Identify the conditions under which deferred taxes would be classified as noncurrent item in the balance sheet. What justification exists for such classification?arrow_forwardThe following balances were taken from the books of Whispering Corp. on December 31, 2025. Interest revenue Cash Sales revenue Accounts receivable Prepaid insurance Sales returns and allowances Allowance for doubtful accounts Sales discounts Land Equipment Buildings Cost of goods sold $87,500 52,500 1,391,500 151,500 21,500 151,500 8,500 46,500 101,500 201,500 141,500 622,500 Assume the total effective tax rate on all items is 20%. Accumulated depreciation-equipment $41,500 Accumulated depreciation-buildings 29,500 Notes receivable Salling expenses Accounts payable Bonds payable Administrative and general expenses Accrued liabilities Interest expense Notes payable Loss from earthquake damage Common stock Retained earnings WHISPERING CORP. Income Statement 156,500 195,500 171,500 101,500 98,500 33,500 61,500 101,500 $ 151,500 Prepare a multiple-step income statement: 100,000 shares of common stock were outstanding during the year. (Round earnings per share to 2 decimal places, e.g.…arrow_forward
- Part A: This year, Gumowski Company has each of the following items in its income statement. 1. Gross profits on installment sales. 2. Revenues on long-term construction contracts. 3. Estimated costs of product warranty contracts. 4. Premiums on officers' life insurance policies with Gumowski as beneficiary. Instructions a. Indicate where deferred income taxes are reported in the financial statements. b. Specify when deferred income taxes would need to be recognized for each of the items above, and indicate the rationale for such recognition. Part B: Gumowski Company's president has heard that deferred income taxes can be classified in different ways in the balance sheet. Instructions Identify the conditions under which deferred income taxes would be classified as a noncurrent item in the balance sheet. What justification exists for such classification?arrow_forwardrecognizes revenues from all sales under the accrual method for financial reporting purposes and appropriately uses the installment method for income tax purposes. Huff's gross Huff Corp. began operations on January 1, 20x8. Huff 6. rent 8. for financial reporting purposes and appropriately uses the purposes. Huff's gross margin on installment sales under each method was as 00. of follows: Year Accrual method Installment method or 20x8 800,000 300,000 20x9 1,300,000 700,000 Enacted income tax rates are 30% for 20x9 and 25% thereafter. There are no other temporary differences. In Huff's December 31, 20x9, balance sheet, the deferred income tax liability should be a. 150,000 b. 180,000 c. 275,000 d. 330,000 (AICPA)arrow_forward4. What amount of total tax expense should be reported? To compute the provision for income tax, the following Pecorino Company had pretax financial income of P2,500,000 The entity made corporate estimated tax payment in the Problem 16-30 (IFRS) in the current year. amount of 180,000 during the current year. information was provided: Interest income received Tax depreciation in excess of financial statement amount 160,000 360,000 Rent received in advance Corporate tax rate. 280,000 30% 1. What amount of permanent difference between book income and taxable income existed at year-end? a. 520,000 b. 360,000 c. 800,000 d. 280,000 2. What amount of current tax expense should be reported? a. 786,000 b. 510,000 c. 750,000 d. 678,000 3. What amount of income tax payable should be reported a. 498,000 b. 606,000 c. 330,000 d. 570,000 a. 714,000 b. 726,000 c. 642,000 d. 594,000 570arrow_forward
- Greenville Industries uses the accrual basis to account for all sales transactions. Sales for 2022 total $500,000. Included in this amount is $70,000 in receivables from sales on installment. Installment sales are considered revenue for book purposes, but not for tax purposes. Operating expenses total $170,000 and are treated the same for book and tax purposes. Assuming a 40% tax rate, what is the amount of Greenville's deferred tax asset or liability? OA. $14,000 deferred tax liability B. $28,000 deferred tax liability OC. $28,000 deferred tax asset OD. $14,000 deferred tax assetarrow_forwardAt the end of the year, a deductible temporary difference of $40 million has been recognised due to the difference between the carrying amount of a liability account for estimated expenses and its tax base. Taxable income is $50 million. No temporary differences existed at the beginning of the year, and the tax rate is 35%. Required: a. Prepare the journal entry(s) to record income taxes during the period. b.How much will income tax expense be shown in the income statement? c. What will be the balance sheet disclosure during the period regarding taxes?arrow_forward4. For the year ended December 31, 20x1, Tyre Co. reported pretax financial statement income of P750,000. Its taxable income was P650,000. The difference is due to accelerated depreciation for income tax purposes. Tyre’s effective income tax rate is 30%, and Tyre made estimated tax payments during 20x1 of P90,000. What amount should Tyre report as current tax expense for 20x1?arrow_forward
- At the end of the year, a deductible temporary difference of $40 million has been recognised due to the difference between the carrying amount of a liability account for estimated expenses and its tax base. Taxable income is $50 million. No temporary differences existed at the beginning of the year, and the tax rate is 35%. Required: a. Prepare the journal entry(s) to record income taxes during the period. b.How much will income tax expense be shown in the income statement? c.arrow_forwardEL Co. reported net income for the current year 2021 at ₱560,000 before provision of income tax during theyear. To compute the provision for income tax, the following data are provided:• Tax depreciation in excess of financial statement amount - ₱ 36,500• Interest income received - ₱ 80,500• Rent received in advance - ₱ 175,000• Dividend income - ₱ 91,700• Estimated tax payment in the current year - ₱ 65,000• Provision for bad debts not yet recognized for tax purposes on the current year - ₱ 48,300• Tax penalties due to late filing on tax return - ₱ 20,000• Corporate tax rate – 30% Required: 14. What is the total income tax expense for the year?15. What is the net income after tax?arrow_forwardEL Co. reported net income for the current year 2021 at ₱560,000 before provision of income tax during theyear. To compute the provision for income tax, the following data are provided:• Tax depreciation in excess of financial statement amount - ₱ 36,500• Interest income received - ₱ 80,500• Rent received in advance - ₱ 175,000• Dividend income - ₱ 91,700• Estimated tax payment in the current year - ₱ 65,000• Provision for bad debts not yet recognized for tax purposes on the current year - ₱ 48,300• Tax penalties due to late filing on tax return - ₱ 20,000• Corporate tax rate – 30% Required: How much is the current tax expense for the year?What is the total deferred tax asset to be presented in the 2021 Statement of Financial Position?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Understanding U.S. Taxes; Author: Bechtel International Center/Stanford University;https://www.youtube.com/watch?v=QFrw0y08Oto;License: Standard Youtube License