Question

In: Accounting

1. The following differences enter into the reconciliation of financial income and taxable income of Abbott...

1. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000

1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024.

2. It is estimated that the litigation liability will be paid in 2024.

3. Rent revenue will be recognized during the last year of the lease, 2024.

4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024.

(a)   Prepare a schedule of future taxable and (deductible) amounts.

(b)   Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

Solutions

Expert Solution

(a) Prepare a schedule of future taxable and (deductible) amounts.

.

Depreciation: Excess tax depreciation will reverse equally over a four-year period, 2021-2024. = 480000 / 4 = 120000

Litigation : It is estimated that the litigation liability will be paid in 2024. =

Unearned rent : Rent revenue will be recognized during the last year of the lease, 2024. =

Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024.

Future taxable (deductible) amounts:

2021

2022

2023

2024

Total

Depreciation

120000

120000

120000

120000

480000

Litigation

( 70000 )

( 70000 )

Unearned rent

(60000)

(60000)

.

(b) Prepare a schedule of the deferred tax (asset) and liability at the end of 2020.

.

.

Future Taxable (Deductible)

.

Deferred Tax

Deferred Tax

Temporary Differences

Amounts

Tax Rate

(Asset)

Liability

Depreciation

$480000

20%

$96000

Litigation

( 70000 )

20%

$14000

Unearned rent

(60000)

20%

12000

Total

.

$(26000)

$96000

Deferred Tax assets = $26000

Deferred Tax liabilities = $96000

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

1. The following differences enter into the reconciliation of financial income and taxable income of Abbott...
1. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000 1. Excess tax depreciation will...
1. The following differences enter into the reconciliation of financial income and taxable income of Abbott...
1. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000 1. Excess tax depreciation will...
The following differences enter into the reconciliation of financial income and taxable income of Abbott Company...
The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years.          Pretax accounting income                                                                  $800,000          Excess tax depreciation                                                                      (480,000)          Litigation accrual                                                                                      70,000          Unearned rent revenue deferred on the books but appropriately                recognized in taxable income                                                            60,000          Interest income from New York municipal bonds                           (20,000)          Taxable...
11. The following differences enter into the reconciliation of financial income and taxable income of Abbott...
11. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000 1. Excess tax depreciation will...
how do you prepare a reconciliation statement to determine taxable income?
how do you prepare a reconciliation statement to determine taxable income?
Denver Co. at the end of 20x1, its first year of operations, prepared reconciliation between pretax financial income and taxable income as follows:
Denver Co. at the end of 20x1, its first year of operations, prepared reconciliation between pretax financial income and taxable income as follows:Pretax financial income                                                                       $300,000Extra depreciation taken for tax purposes                                             900,000Estimated litigation expenses deductible for taxes when paid           1,500,000Rent collected on the tax return is greater than rent reported onthe income statement by $220,000                                                  Interest income from Denver municipal bonds                                    100,000           Use of the depreciable assets will result in taxable amounts of $300,000 in each of...
A reconciliation of Sunland Company's pretax accounting income with its taxable income for 2021, its first...
A reconciliation of Sunland Company's pretax accounting income with its taxable income for 2021, its first year of operations, is as follows: Pretax accounting income $3900000 Excess tax depreciation (189000) Taxable income $3711000 The excess tax depreciation will result in equal net taxable amounts in each of the next three years. Enacted tax rates are 30% in 2021, 25% in 2022 and 2023, and 20% in 2024. The total deferred tax liability to be reported on Sunland's balance sheet at...
Rehobeth Company's taxable income and other financial data for 2016 are presented below: Taxable income                          
Rehobeth Company's taxable income and other financial data for 2016 are presented below: Taxable income                                                                                                                                        $500,000 Interest received on municipal bonds                                                                                            75,000 Estimated bad debt expense (not written off)                                                                                  40,000 Cash expenditures for product warranty expenses                                                                         108,000 Product warranty expense for accounting purposes                                                                            142,000 Gross profit on installment sales for 2016                                                                                           180,000 Gross profit recognized in 2016 for tax purposes based on installment sales...
1. In general terms, identify the similarities and differences between the corporate taxable income formula and...
1. In general terms, identify the similarities and differences between the corporate taxable income formula and the individual taxable income formula. 2. What taxes are individuals subject to that corporations are not?
tanhope, Inc. Reconciliation of Pretax Accounting Income to Taxable Income Year ended December 31, year 2...
tanhope, Inc. Reconciliation of Pretax Accounting Income to Taxable Income Year ended December 31, year 2 Pretax accounting income $678,000 Expenses recorded on books this year not deductible for tax purposes: Meals and entertainment expenses 12,000 Bad debts expense provision 15,000 27,000 Subtotal 705,000 Income recorded on books this year not subject to tax: Tax-exempt interest income 15,000 Unrealized gain (loss) on trading securities 8,000 Deductions on tax return not charged against book income this year: Depreciation expense 63,000 Bad...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT