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Text: E 16-1
LO16-2 LO16-3
Text: E 16-11
Stancil Industries reports pretax accounting income of $80 million, but due to
a single temporary difference, taxable income is only $50 million. At the
beginning of the year, no temporary differences existed.
Required:
Assuming a tax rate of 35%, prepare the appropriate journal entry to record
Stancils income taxes.
In 2016, Lambert Services collected rent revenue for 2017 tenant occupancy.
For income tax reporting, the rent is taxed when collected. For financial
statement reporting, the rent is recognized as income in the period earned. The
unearned portion of the rent collected in 2016 amounted to $90,000 at
December 31, 2016. Lambert had no temporary differences at the beginning of
the year.
Required:
Assuming an income tax rate of 40%, and that the 2016 income tax payable is
$285,000, prepare the journal entry to record income taxes for 2016.
At the end of 2015, Mathis Industries had a deferred tax asset account with a
balance of $120 million attributable to a temporary book-tax difference of $300
million in a liability for estimated expenses. At the end of 2016, the temporary
difference is $280 million. Mathis has no other temporary differences. Taxable
income for 2016 is $720 million and the tax rate is 40%.
Mathis has a valuation allowance of $40 million for the deferred tax asset at
the beginning of 2016.
Required:
1. Prepare the journal entry(s) to record Mathiss income taxes for 2016
assuming it is more likely than not that the deferred tax asset will be
realized.
2. Prepare the journal entry(s) to record Mathiss income taxes for 2016
assuming it is more likely than not that one-half of the deferred tax asset
will not ultimately be realized.
AlternateExercisesandProblems
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13-1
161
Exercise 16-4
Exercise 16-5
Problem 16-1
Multiple
differences;
calculate taxable
income
Intraperiod tax
allocation
LO16-1 LO16-4
Text: E 16-29
LO16-10
LO16-5
Text: P 16-3
Text: E 16-13
The following income statement does not reflect intraperiod tax allocation.
Income Statement
For the fiscal year ended June 30, 2016
($ in millions)
Revenues
Cost of goods sold
Gross profit
Operating expenses
Income tax expense
Income before discontinued operations and extraordinary item
Loss from discontinued operations
Net income
The companys tax rate is 40%.
Required:
Recast the income statement to reflect intraperiod tax allocation.
$415
(175)
$240
(90)
(44)
$106
(40)
$ 66
PROBLEMS
income for tax purposes when collected. Income recognized for financial
reporting purposes in 2016 for lots sold this way was $48 million which will be
collected over the next three years. Scheduled collections for 2017-2019 are as
follows:
2017
$ 16 million
2018
20 million
2019
12 million
$48 million
Pretax accounting income for 2016 was $68 million. The enacted tax rate is
40 percent.
Required:
1. Assuming no differences between accounting income and taxable income
other than those described above, prepare the journal entry to record income
taxes in 2016.
2. Suppose a new tax law, revising the tax rate from 40% to 35%, beginning in
2018, is enacted in 2017, when pretax accounting income was $60 million.
Prepare the appropriate journal entry to record income taxes in 2017.
3. If the new tax rate had not been enacted, what would have been the
appropriate balance in the deferred tax liability account at the end of 2017?
Why?
AlternateExercisesandProblems
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13-3
163
Problem 16-2
Net operating loss
carryback and
carryforward;
temporary
difference;
permanent
difference
LO16-2 LO16-4
LO16-7
Text: P 16-10
164
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