Melissa Corporation is domiciled in Germany and is listed on both the Frankfurt and New York Stock
Question:
On December 31, 2014, Melissa Corporation purchased a small office building for $1,380,000. For tax and financial reporting purposes, Melissa estimates that the building has a useful life of 40 years with an estimated residual value of $100,000. Melissa uses straight-line depreciation for financial reporting. Assume that, for tax purposes, Melissa is permitted to deduct 5% of an assets depreciable base in the first year. This is the only building that Melissa owns.
At the end of 2015, Melissa had the building appraised by a qualified real estate appraiser who estimated the fair value of the building was $1,172,500. Melissa intends to occupy the building it-self, and therefore, the building is classified as property, plant, and equipment under both U.S. GAAP and IFRS. After being revalued under IFRS, the Building account has a balance of $1,172,500 and the Accumulated depreciation account has a balance of zero. Assume Melissa will have sufficient income in the future to recover any deferred tax assets that might be recognized.
Required:
Answer the following questions for each of the following scenarios:
1. Melissa prepares its consolidated financial statements under U.S. GAAP.
a. Calculate taxable income in 2015.
b. Prepare the journal entry to record tax expense, deferred taxes, and taxes payable.
c. What is the effective tax rate?
2. Melissa prepares its consolidated financial statements in accordance with IFRS.
a. Calculate taxable income in 2015.
b. Prepare the journal entry to record tax expense, deferred taxes, and taxes payable.
c. What is the effective taxrate?
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
Question Posted: