Question

Comprehensive

Instructions

Chart of Accounts

General Journal

Labels and Amount Descriptions

Income Statement

Retained Earnings

Balance Sheet

Instructions

At the beginning of 2016, Norris Company had a deferred tax liability of $6,300, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 38% tax rate for 2017 and future years.

Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $122,300 (revenues of $353,300 and expenses of $231,000); gain on disposal of Division F, $23,000; loss from operations of discontinued Division F, $10,200; and prior period adjustment, $15,200, due to an error that understated revenue in 2015. All of these items are taxable; however, financial depreciation for 2016 on assets related to continuing operations exceeds tax depreciation by $4,000. Norris had a retained earnings balance of $160,900 on January 1, 2016, and declared and paid cash dividends of $33,600 during 2016.

Required:

1.	Prepare Norris’s income tax journal entry at the end of 2016.
2.	Prepare Norris’s 2016 income statement.
3.	Prepare Norris’s 2016 statement of retained earnings.
4.	Show the related income tax disclosures on Norris’s December 31, 2016, balance sheet.

General Journal

Prepare Norris’s income tax journal entry on December 31, 2016.

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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Labels and Amount Descriptions

Labels
Current Assets
Current Liabilities
Noncurrent Liabilities
Noncurrent Assets
Results from discontinued operations
Amount Descriptions
Adjusted retained earnings, January 1, 2016
Cash dividends
Deferred income taxes
Expenses
Income from continuing operations
Net income
Prior period adjustment
Pretax income from continuing operations
Retained earnings, December 31, 2016
Revenues
Retained earnings, January 1, 2016

Income Statement

Prepare Norris’s 2016 income statement. Additional Instructions

NORRIS COMPANY

Income Statement

For Year Ended December 31, 2016

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Retained Earnings

Prepare Norris’s 2016 statement of retained earnings. Additional Instructions

NORRIS COMPANY

Statement of Retained Earnings

For Year Ended December 31, 2016

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Balance Sheet

Show the related income tax disclosures on Norris’s December 31, 2016, balance sheet. Additional Instructions

NORRIS COMPANY

Partial Balance Sheet

December 31, 2016

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Answer 1

A) Journal Entry-

Date	Account titles and description	Debit ($)	Credit ($)
Dec 31, 2016	Income Tax Expense (Difference)	36,157
	Gain on Disposal of Division F ($23,000*30%)	6,900
	Retained Earnings (15,200*30%)	4,560
	Deferred Tax Liability ($4560*38%)	1,733
	Loss from operations of discontinued Division F ($10,200*30%)		3,060
	Income Tax Payable*		46,290

*Income Tax Payable

	Amount ($)
Income from Continuing Operations	122,300
Add: Gain on disposal of division F	23,000
Add: Decrease in Future Taxable amount	4,000
Add: Understated revenue	15,200
Less: Loss from operations of discontinued Division F	(10,200)
Taxable Income	154,300
Tax Liability @ 30%	46,290

B) Income Statement

	Amount ($)
Revenues		353,300
Less:Expenses		(231,000)
Pretax Income for Continuing Operations		122,300
Less:Income Tax Expense (From A above)		(36,157)
Income from Continuing Operations		86,143
Results from Discontinued Operations:
Less: Loss from Operations of Division F ($10,200-$3,060)   (From A above)	(7,140)
Add: Gain on disposal ($23,000-$6,900) (From A above)	16,100	8,960
Net Income		95,103

C) Statement of Retained Earnings

	Amount ($)
Retained Earnings, January 1, 2016	160,900
Add: Prior period Adjustment (15,200-4,560) (From A above)	10,640
Adjusted retained earnings, January 1, 2016	171,540
Add: Net Income (From B above)	95,103
	266,643
Less: Cash Dividends	(33,600)
Retained Earnings, December 31,2016	233,043

D) Partial Balance Sheet

	Amount ($)
Current Liabilities
Income Tax Payable   (From A above)	46,290
Non-Current Liabilities
Deferred Income Taxes ($6300 beginning deferred tax liability-$1,733 decrease) (From A above)	4,567

----------------HOPE THIS IS HELPFUL