Question
In: Accounting
Problem Three Magruder Company reports pretax accounting income of $5,000,000 for 2019. The 2019 income tax...
Problem Three
Magruder Company reports pretax accounting income of $5,000,000 for 2019. The 2019 income tax rate is 20%. INCLUDED in accounting income is depreciation expense of $500,000 which was calculated using the straight line method. Magruder’s tax manager indicates that depreciation expense per the tax return will be $2,000,000 because the tax laws allow more accelerated depreciation. Magruder’s pretax accounting income does NOT include $1,000,000 of prepaid rent that a tenant paid to the company in 2019 because the prepayment represents rent due for 2020. The accountant properly recorded this amount as a liability on the balance sheet (Unearned Rent). The tax manager advises that the $1,000,000 must be INCLUDED in taxable income for 2019.
Required:
1. Calculate taxable income and income tax payable for 2019.
2. Prepare the adjusting entry to record income tax expense, deferred income taxes, and income tax payable.
Solutions
Feedback is welcomed.
ekkarill92 answered 1 year agoRelated Solutions
Magruder Company reports pretax accounting income of $5,000,000 for 2019. The 2019 income tax rate is...
Magruder Company reports pretax accounting income of $5,000,000
for 2019. The 2019 income tax rate is 20%. INCLUDED in accounting
income is depreciation expense of $500,000 which was calculated
using the straight line method. Magruder’s tax manager indicates
that depreciation expense per the tax return will be $2,000,000
because the tax laws allow more accelerated depreciation.
Magruder’s pretax accounting income does NOT include $1,000,000 of
prepaid rent that a tenant paid to the company in 2019 because the
prepayment represents...
Magruder Company reports pretax accounting income of $5,000,000 for 2019. The 2019 income tax rate is...
Magruder Company reports pretax
accounting income of $5,000,000 for 2019. The 2019 income tax rate
is 20%. INCLUDED in accounting income is depreciation expense of
$500,000 which was calculated using the straight line method.
Magruder’s tax manager indicates that depreciation expense per the
tax return will be $2,000,000 because the tax laws allow more
accelerated depreciation. Magruder’s pretax accounting income does
NOT include $1,000,000 of prepaid rent that a tenant paid to the
company in 2019 because the prepayment represents...
Company A reports pretax financial income of $100,000 for 2019. The following items caused taxable income...
Company A reports pretax financial income of $100,000 for 2019.
The following items caused taxable income to be different than
pretax financial income.
$5,000 of life insurance carried by the company on key
officers.
Estimated warranty liability is $20,000 for accounting purposes
and $0 for tax purposes.
Depreciation for tax purposes exceeds depreciation for
accounting purposes by $25,000.
Company A's tax rate is 25% for all years, and the company
expects to report taxable income in all future years. There...
I NEED CALCULATION/PROCESSES TO UNDERSTAND IT. Company A reports pretax financial income of $100,000 for 2019....
I NEED CALCULATION/PROCESSES TO UNDERSTAND
IT.
Company A reports pretax financial income of $100,000 for 2019.
The following items caused taxable income to be different than
pretax financial income.
$5,000 of life insurance carried by the company on key
officers.
Estimated warranty liability is $20,000 for accounting purposes
and $0 for tax purposes.
Depreciation for tax purposes exceeds depreciation for
accounting purposes by $25,000.
Company A's tax rate is 25% for all years, and the company
expects to report taxable...
The DeVille Company reported pretax accounting income on its income statement as follows: 2019 2020 2021...
The DeVille Company reported pretax accounting income on its
income statement as follows: 2019 2020 2021 2022 Pretax accounting
income $350,000 270,000 340,000 380,000 Included in the income of
2019 was an installment sale of property in the amount of $50,000.
However, for tax purposes, DeVille reported the income in the year
cash was collected. Cash collected on the installment sale was
$20,000 in 2020, $25,000 in 2021, and $5,000 in 2022. Included in
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Sheffield Inc. reports the following pretax income (loss) for both book and tax purposes. Year Pretax...
Sheffield Inc. reports the following pretax income (loss) for both
book and tax purposes.
Year
Pretax
Income (Loss)
Tax Rate
2018
$113,000
20
%
2019
97,000
20
%
2020
(308,000
)
25
%
2021
117,000
25
%
The tax rates listed were all enacted by the beginning of 2018.
Prepare the journal entries for years 2018–2021 to record income
tax expense (benefit) and income taxes payable (refundable), and
the tax effects of the loss carryforward, assuming that based on
the...
Bramble Inc. reports the following pretax income (loss) for both book and tax purposes. Year Pretax...
Bramble Inc. reports the following pretax income (loss) for both
book and tax purposes.
Year
Pretax
Income (Loss)
Tax Rate
2018
$117,000
20
%
2019
90,000
20
%
2020
(257,000)
25
%
2021
123,000
25
%
Prepare the journal entries for years 2018–2021 to record income
tax expense (benefit) and income taxes payable (refundable), and
the tax effects of the loss carry forward, assuming that based on
the weight of available evidence, it is more likely than not that
one-half...
Beilman Inc. reports the following pretax income (loss) for both book and tax purposes. Year Pretax...
Beilman Inc. reports the following pretax income (loss) for both
book and tax purposes.
Year
Pretax
Income (Loss)
Tax Rate
2018
$120,000
20
%
2019
90,000
20
%
2020
(80,000
)
25
%
2021
1,200,000
25
%
The tax rates listed were all enacted by the beginning of
2018.Prepare the journal entries for years 2018–2021 to record
income tax expense (benefit) and income taxes payable, and the tax
effects of the loss carryforward, assuming that based on the weight
of...
Larkspur Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the...
Larkspur 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
$113,000
40
%
2016
97,000
40
%
2017
(308,000
)
45
%
2018
117,000
45
%
The tax rates listed were all enacted by the beginning of 2015.
Prepare the journal entries for years 2015–2018 to record income
tax expense (benefit) and income taxes payable (refundable),...
The accounting records of Perkins Inc. show the following data for 2019. Pretax financial income was...
The accounting records of Perkins Inc. show the following data
for 2019. Pretax financial income was $640,000. Life insurance
expense on officers was $16,000. Equipment was acquired in early
January for $450,000, straight-line depreciation over 5 year life
is used, with no salvage value. For tax purposes, Perkins Inc. used
a 40% rate to calculate depreciation. Product warranties were
estimated to be $75,000 in 2018. Actual repair and labor costs
related to the warranties in 2019 were $15,000 and the...
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