Question: Millie Co completed its first year of operations on December

Millie Co. completed its first year of operations on December 31, 2014, with pre-tax financial income of $400,000. Millie accrued a contingent liability of $900,000 for financial reporting purposes; however, the $900,000 will be paid and therefore is deductible for tax purposes in 2015. Millie also has gross profit from installment sales of $800,000 recognized currently for financial reporting purposes but that will be taxable in 2015 and 2016 when the cash is received ($400,000 each year). Millie’s pre-tax financial income includes $38,000 interest earned on its holdings of the bonds of the State of Montana. The tax rate is 30% for all years.

1. Determine Millie’s taxable income and taxes payable for 2014.
2. Determine the changes in Millie’s deferred tax amounts for 2014.
3. Calculate tax expense for Millie for 2014.

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  • CreatedSeptember 10, 2014
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