Question

Metge Corporation’s worksheet for calculating taxable income for 2014 follows:
($ in thousands) ...... 2014
Pre-tax income ...... $1,000
Permanent differences
Goodwill impairment .... 400
Interest on municipal bonds . (200)
Temporary differences
Depreciation ........ (800)
Warranty costs ....... 400
Rent received in advance .. 600
Taxable income ...... $1,400
The enacted tax rate for 2014 is 35%, but it is scheduled to increase to 40% in 2015 and sub- sequent years. All temporary differences are originating differences.

Required:
1. Determine Metge’s 2014 taxes payable.
2. What is the change in deferred tax assets (liabilities) for 2014?
3. Determine tax expense for 2014.
4. Provide a schedule that reconciles Metge’s statutory and effective tax rates (in both percentages and dollar amounts).



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  • CreatedSeptember 10, 2014
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