Question

In: Accounting

Vigor Corporation reports a net income before tax for 2020 of $512,800, has a tax rate...

Vigor Corporation reports a net income before tax for 2020 of $512,800, has a tax rate of 21% and provides the following selected information (covers the three tax difference items) from its ledger as at December 31, 2019 and 2020:

2019 2020

Equipment, at cost 900,000 DR 900,000 DR

Accumulated depreciation, equipment 450,000 CR 525,000 CR

Deferred Tax Asset 10,080 DR ?

Warranty Liability 48,000 CR 56,000 CR

Deferred Tax Liability 47,250 CR ?

Depreciation expense, equipment 75,000 DR 75,000 DR

Warranty expense 27,000 DR 30,000 DR

Municipal bond interest (tax exempt) 17,800 CR 18,800 CR

The tax basis of the equipment (book value for tax purposes or the amount of the cost of the asset not yet deducted for tax purposes) is $225,000 at December 31, 2019 and $112,500 as at December 31, 2020. The tax deduction for warranties is limited to actual warranty payments.

Required:

What is the tax deduction for warranties on Vigor’s 2020 tax return?
What is taxable income for 2020?
What is income tax expense/benefit, current portion for 2020?
What is the amount of the deferred tax asset at December 31, 2020?
What is the amount of the deferred tax liability at December 31, 2020?
What was income tax expense/benefit, deferred portion for 2020?
What is Vigor’s effective income tax rate (ETR) for 2020?

Expert Solution

Skip to main contentSkip to article

Access through your institution

Get Access

Share

Export

Journal of International Accounting, Auditing and Taxation

Volume 27, 2016, Pages 1-12

Interpretation of probability expressions in accounting: The effects of frame switching

Author links open overlay panelEsperanzaHuertaaGary P.Braunc

https://doi.org/10.1016/j.intaccaudtax.2016.06.001Get rights and content

Abstract

We report the results of an experiment that examines the interpretation of probability expressions included in the International Financial Reporting Standards by bicultural individuals. In particular, we examine the impact of a phenomenon known as frame switching, which occurs when the thinking processes of bicultural individuals are influenced by the language they use. We compared the interpretation of participants from two distinct cultures (Americans and Mexicans) and from participants who share both cultures (Mexican-Americans). We find, consistent with the expected effects of frame switching, that the interpretations of probability expressions by Mexican-Americans were influenced by the language in which they read the standards. The responses of Mexican-Americans reading the standards in Spanish tended toward those of Mexicans; whereas the responses of Mexican-Americans reading the standards in English tended toward the interpretations of Americans.

Previous
Next

Keywords

Culture

Language

IFRS

Frame switching

Interpretation of accounting standards

A firm reports Net Income of $21,000 with a tax rate of 30%. It pays interest...

A firm reports Net Income of $21,000 with a tax rate of 30%. It pays interest in the amount of $10,000. Its net profit margin is 7% and its costs are $160,000, not including depreciation. Calculate depreciation. Calculate the operating cash flow. The firm’s last balance sheet showed net fixed assets of $500,000 and the current balance sheets shows net fixed assets of $500,000. What was the company’s net capital spending this year?

Luxley Corporation has $150,000 of income before taxes in its 2020 accounting records. In computing income...

Luxley Corporation has $150,000 of income before taxes in its 2020 accounting records. In computing income tax expense, Luxley makes the following observations of differences between the accounting records and the tax return: 1. An accelerated depreciation method is used for tax purposes. In 2020, Luxley reports $12,000 more depreciation...

1) Cullumber Corporation had 2020 net income of $1,407,000. During 2020, Cullumber has not declared or...

1) Cullumber Corporation had 2020 net income of $1,407,000. During 2020, Cullumber has not declared or paid any dividend on 93,000 non-cumulative preferred shares. Cullumber also had 210,000 common shares outstanding during the year. Calculate Cullumber’s 2020 earnings per share. 2) Sandhill Corporation reported net income of $347,760 in 2020 and had 245,000 common shares outstanding throughout the year. Also outstanding all year were 21,000 (written) options to purchase common shares at $10 per share. The average market price for...

15) ABC Inc. has a net income of $1,000. The tax rate is 21% and the...

15) ABC Inc. has a net income of $1,000. The tax rate is 21% and the firm made an interest payment of $250 during the year. The depreciation for the year was $200. During the year, the net fixed assets increased by $500. Cash increased by $50, inventories decreased by $75, receivables increased by $100, payables declined by $125, and the short term debt for the company increased by 150. The firm saw its common stock and paid in surplus...

Purple Company has $200,000 in net income for 2020 before deducting any compensation or other payment...

Purple Company has $200,000 in net income for 2020 before deducting any compensation or other payment to its sole owner, Kirsten. Kirsten is single and she claims the $12,400 standard deduction for 2020. Purple Company is Kirsten's only source of income. Ignoring any employment tax considerations, compute Kirsten's after-tax income for each of the following situations. Click here to access the 2020 individual tax rate schedule to use for this problem. Assume the corporate tax rate is 21%. When required,...

A us corporation is subject to an income tax rate of 35% and has a branch...

A us corporation is subject to an income tax rate of 35% and has a branch in the UK which paid the national corporate tax rate of 30% on its earnings there. The branch generated taxable income from its operations in UK equivalent to $5,000,000. What is the amount of taxes owed to the us government on the income generated in the UK

What will be the net income or loss on the income statement assuming a tax rate...

What will be the net income or loss on the income statement assuming a tax rate of 30.00% (identify if the value will be a net income or a net loss) Accounts as shown on a Trial Balance on December 31, 2013 DB CR Accounts Payable 7,600.00 Accounts Receivable 9,000.00 Accumulated Amortization 1,000.00 Accumulated Depreciation 2,000.00 Add'l Paid-in-Capital 25,905.00 Bond Investment 13,000.00 Cash 22,500.00 Common Stock 5,000.00 Cost of Goods Sold 125,000.00...

In 2020, RST Corporation has $75,000 of income before taxes in its accounting records. In computing...

In 2020, RST Corporation has $75,000 of income before taxes in its accounting records. In computing income tax expense, RST makes the following observations of differences between the accounting records and the tax return: An accelerated depreciation method is used for tax purposes. In 2020, RST reports $6,000 more depreciation expense for tax purposes than it shows in the accounting records. In 2020, RST collected $60,000 from a business that is renting a portion of its warehouse. The $60,000 covers...

The before-tax income for Whispering Co. for 2020 was $97,000 and $72,300 for 2021. However, the...

The before-tax income for Whispering Co. for 2020 was $97,000 and $72,300 for 2021. However, the accountant noted that the following errors had been made: 1. Sales for 2020 included amounts of $38,500 which had been received in cash during 2020, but for which the related products were delivered in 2021. Title did not pass to the purchaser until 2021. 2. The inventory on December 31, 2020, was understated by $7,800. 3. The bookkeeper in recording interest expense for both...

The before-tax income for Nash Co. for 2020 was $101,000 and $81,800 for 2021. However, the...

The before-tax income for Nash Co. for 2020 was $101,000 and $81,800 for 2021. However, the accountant noted that the following errors had been made: 1. Sales for 2020 included amounts of $35,500 which had been received in cash during 2020, but for which the related products were delivered in 2021. Title did not pass to the purchaser until 2021. 2. The inventory on December 31, 2020, was understated by $8,400. 3. The bookkeeper in recording interest expense for both...