Project #3598 - Accounting HW 3

Chapters 16 & 17

Intermadiate Accounting II ____________________________________________________________________________

_______________________________________________________

 

1. Gallo Light began operations in 2013. The company sometimes sells used warehouses on an installment basis. In those cases, Gallo Light reports income in its income statement in the year of the sale. In its income tax return, though, Gallo Light reports installment income by the installment method. Installment income in 2013 was $90,000, which Gallo Light expects to collect equally over the next three years. The tax rate is 30%, but based on an enacted law, is scheduled to become 35% in 2015.

Gallo Light's pretax accounting income from the 2013 income statement was $830,000, which includes $40,000 of interest revenue from an investment in municipal bonds. There were no differences between accounting income and taxable income other than those described above.

Required:

(1.) Prepare the appropriate journal entry to record Gallo Light's 2013 income taxes. Show calculations.
(2.) What is Gallo Light's 2013 net income? 


 


2. At the end of the preceding year, World Industries had a deferred tax asset of $17,500,000, attributable to its only temporary difference of $50,000,000 for estimated expenses. At the end of the current year, the temporary difference is $45,000,000. At the beginning of the year there was no valuation account for the deferred tax asset. At year-end, World Industries now estimates that it is more likely than not that one-third of the deferred tax asset will never be realized. Taxable income is $12,000,000 for the current year and the tax rate is 30% for all years.

Required:

Prepare journal entries to record World Industries' income tax expense for the current year. Show well-labeled supporting computations for each component of the journal entries. 


 


 


 

 

3. The information below pertains to Mondavi Corporation:

(a.) For the current year temporary differences existed between the financial statement carrying amounts and the tax basis of the following:

  

(b.) No temporary differences existed at the beginning of the year.
(c.) Pretax accounting income was $300,000,000 and taxable income was $120,000,000 for the year and the tax rate is 40%.

Required:

Prepare one journal entry to record the tax provision for the current year. Provide supporting computations. 


 


4. Brook Company has taken a position on its tax return to claim a tax credit of $30 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not" based on its technical merits. Brook's management has developed the probability table shown below of all possible material outcomes:

  

Brook's taxable income is $300 million for the year, and its effective tax rate is 40%. The tax credit would be a direct reduction in current taxes payable.

Required:

1. At what amount would Brook measure the tax benefit in its income statement?
2. Prepare the appropriate journal entry for Brook to record its income taxes for the year. 


 


 


 

 

5. Tobac Company reported a pretax operating loss of $50,000 for financial reporting and tax purposes in 2013. The enacted tax rate is 40% for 2013 and subsequent years. Assume that Tobac requests a refund of taxes already paid by electing a loss carryback. Taxable income, tax rates, and income taxes paid in Tobac's first four years of operations were as follows:

  

Required:

1.) Prepare the journal entry to record Tobac's income taxes for the year 2013. Show well-labeled computations. 
2.) Compute Tobac's net loss for 2013. 


 

6. Tobac Company reported an operating loss of $132,000 for financial reporting and tax purposes in 2013. The enacted tax rate is 40% for 2013 and all future years. Assume that Tobac elects a loss carryback. No valuation allowance is needed for any deferred tax assets. Taxable income, tax rates, and income taxes paid in Tobac's first four years of operations were as follows:

  

Required:

1.) Prepare a compound journal entry to record Tobac's tax provision for the year 2013. Show well-labeled computations.
2.) Compute Tobac's net loss for 2013. 


 


 


 

 

7. Pension data for Matta Corporation include the following for the current calendar year:

  

Required:

Assuming no change in actuarial assumptions and estimates, determine the service cost component of pension expense for the current year. 


 


 8. Carolina Consulting Company has a defined benefit pension plan. The following pension-related data were available for the current calendar year:

  

There were no other relevant data.

Required:

1) Calculate the 2013 pension expense. Show calculations.
2) Prepare the 2013 journal entries to record pension expense and funding.
3) Prepare any journal entries to record any 2013 gains or losses. 

9. Data pertaining to the postretirement health care benefit plan of Danielson Delivery Service include the following for the current calendar year:

  

Required:

1) Determine Danielson's postretirement benefit expense for the current year.
2) Prepare the journal entries to record the benefit expense and funding for the current year. 


 

10. Bazerman Inc. has a postretirement health care benefit plan. On January 1 of the current calendar year, the following plan-related data were available.

  

The rate of return on plan assets during the year was 12%. The expected return was 10%. The actuary revised assumptions regarding the APBO at the end of the year, resulting in a $42,000 increase in the estimate of the obligation.

Required:

1) Calculate any amortization of net loss that should be included as a component of postretirement benefit expense for the current year.
2) Determine the net loss or gain as of December 31 of the current year. 

Subject Business
Due By (Pacific Time) 03/26/2013 05:04 am
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