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intermediate accounting
Intermediate Accounting 17th edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel - Solutions
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.InstructionsUse the companies’ financial information to answer the following
The pretax financial income of Truttman Company differs from its taxable income throughout each of 4 years as follows. Pretax financial income for each year includes a nondeductible expense of $30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial
Oxford Corporation began operations in 2020 and reported pretax financial income of $225,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by $40,000. Oxford’s tax rate for 2020 and years thereafter is 30%. In its December 31, 2020, balance sheet, what amount of
Dexter Company appropriately uses the asset-liability method to record deferred income taxes. Dexter reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purposes and the straight-line basis for financial
Bandung Corporation began 2020 with a $46,000 balance in the Deferred Tax Liability account. At the end of 2020, the related cumulative temporary difference amounts to $350,000, and it will reverse evenly over the next 2 years. Pretax accounting income for 2020 is $525,000, the tax rate for all
The following information has been obtained for Gocker Corporation.1. Prior to 2020, taxable income and pretax financial income were identical.2. Pretax financial income is $1,700,000 in 2020 and $1,400,000 in 2021.3. On January 1, 2020, equipment costing $1,200,000 is purchased. It is to be
Zurich Company reports pretax financial income of $70,000 for 2020. The following items cause taxable income to be different than pretax financial income.1. Depreciation on the tax return is greater than depreciation on the income statement by $16,000.2. Rent collected on the tax return is greater
DeJohn Company, which began operations at the beginning of 2018, produces various products on a contract basis. Each contract generates a gross profit of $80,000. Some of DeJohn’s contracts provide for the customer to pay on an installment basis. Under these contracts, DeJohn collects one-fifth
At December 31, 2020, Appaloosa Corporation had a deferred tax liability of $25,000. At December 31, 2021, the deferred tax liability is $42,000. The corporation’s 2021 current tax expense is $48,000. What amount should Appaloosa report as total 2021 income tax expense?
The following facts relate to Krung Thep Corporation.1. Deferred tax liability, January 1, 2020, $20,000.2. Deferred tax asset, January 1, 2020, $0.3. Taxable income for 2020, $95,000.4. Pretax financial income for 2020, $200,000.5. Cumulative temporary difference at December 31, 2020, giving rise
The book basis of depreciable assets for Erwin Co. is $900,000, and the tax basis is $700,000 at the end of 2021. The enacted tax rate is 17% for all periods. Determine the amount of deferred taxes to be reported on the balance sheet at the end of 2021.
Jennings Inc. reported the following pretax income (loss) and related tax rates during the years 2019?2022. Pretax financial income (loss) and taxable income (loss) were the same for all years since Jennings began business. The tax rates from 2019?2022 were enacted in 2019. Instructions a.
At December 31, 2020, Suffolk Corporation had an estimated warranty liability of $105,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until paid.) The effective tax rate is 20%. Compute the amount Suffolk should report as a deferred tax asset at December
At December 31, 2020, Higley Corporation has one temporary difference which will reverse and cause taxable amounts in 2021. In 2020, a new tax act set taxes equal to 35% for 2020, 30% for 2021, and 20% for 2022 and years thereafter.InstructionsExplain what circumstances would call for Higley to
Roth Inc. has a deferred tax liability of $68,000 at the beginning of 2021. At the end of 2021, it reports accounts receivable on the books at $90,000 and the tax basis at zero (its only temporary difference). If the enacted tax rate is 17% for all periods, and income taxes payable for the period
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020. 1. Mooney Co. has developed the following schedule of future taxable and deductible amounts. 2. Roesch Co. has the following schedule
At December 31, 2020, Hillyard Corporation has a deferred tax asset of $200,000. After a careful review of all available evidence, it is determined that it is probable that $60,000 of this deferred tax asset will not be realized. Prepare the necessary journal entry.
At December 31, 2020, Percheron Inc. had a deferred tax asset of $30,000. At December 31, 2021, the deferred tax asset is $59,000. The corporation’s 2021 current tax expense is $61,000. What amount should Percheron report as total 2021 income tax expense?
Maria Rodriquez and Lynette Kingston are discussing accounting for income taxes. They are currently studying a schedule of taxable and deductible amounts that will arise in the future as a result of existing temporary differences. The schedule is as follows. Instructions a. Explain the concept of
Complete the following statements by filling in the blanks.a. In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _________ (less than, greater than) pretax financial income.b. If a $38,000 balance in Deferred Tax Asset was computed by use of a
Crosley Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is 3 years; one-third of the sale price is
Rode Inc. incurred a net operating loss of $500,000 in 2020. Combined income for 2018 and 2019 was $350,000. The tax rate for all years is 20%. Prepare the journal entries to record the benefits of the loss carryforward.
At December 31, 2020, Hillyard Corporation has a deferred tax asset of $200,000. After a careful review of all available evidence, it is determined that it is more likely than not that $60,000 of this deferred tax asset will not be realized. Prepare the necessary journal entry.
Button Company has the following two temporary differences between its income tax expense and income taxes payable. The income tax rate for all years is 20%. Instructions a. Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense,
Pretax financial income for Lake Inc. is $300,000, and its taxable income is $100,000 for 2021. Its only temporary difference at the end of the period relates to a $70,000 difference due to excess depreciation for tax purposes. If the tax rate is 20% for all periods, compute the amount of income
The following information was disclosed during the audit of Elbert Inc.1. Amount DueYear
Use the information for Rode Inc. given in IFRS19.7. Assume that it is probable that the entire net operating loss carryforward will not be realized in future years. Prepare the journal entry(ies) necessary at the end of 2020.In IFRS19.7Rode Inc. incurred a net operating loss of $500,000 in 2020.
Mitchell Corporation had income before income taxes of $195,000 in 2020. Mitchell’s current income tax expense is $24,000, and deferred income tax expense is $15,000. Prepare Mitchell’s 2020 income statement, beginning with “Income before income taxes.”
At December 31, 2019, Belmont Company had a net deferred tax liability of $375,000. An explanation of the items that compose this balance is as follows. In analyzing the temporary differences, you find that $30,000 of the depreciation temporary difference will reverse in 2020, and $120,000 of the
Feagler Company’s current income taxes payable related to its taxable income for 2020 is $460,000. In addition, Feagler’s deferred tax asset decreased $20,000 during 2020. What is Feagler’s income tax expense for 2020?
Wise Company began operations at the beginning of 2021. The following information pertains to this company.1. Pretax financial income for 2021 is $100,000.2. The tax rate enacted for 2021 and future years is 20%.3. Differences between the 2021 income statement and tax return are listed below:a.
Youngman Corporation has temporary differences at December 31, 2020, that result in the following deferred taxes.Deferred tax asset............................$24,000Deferred tax liability...........................69,000Indicate how these balances would be presented in Youngman’s December 31,
Shetland Inc. had pretax financial income of $154,000 in 2020. Included in the computation of that amount is insurance expense of $4,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation by $10,000. Prepare Shetland’s journal
The following facts relate to Duncan Corporation.1. Deferred tax liability, January 1, 2020, $30,000.2. Deferred tax asset, January 1, 2020, $10,000.3. Taxable income for 2020, $105,000.4. Cumulative temporary difference at December 31, 2020, giving rise to future taxable amounts, $230,000.5.
Lee Company’s current income taxes payable related to its taxable income for 2020 is $320,000. In addition, Lee’s deferred tax liability increased $40,000 and its deferred tax asset increased $10,000 during 2020. What is Lee’s income tax expense for 2020?
At December 31, 2020, Cascade Company had a net deferred tax liability of $450,000. An explanation of the items that compose this balance is as follows. In analyzing the temporary differences, you find that $30,000 of the depreciation temporary difference will reverse in 2021, and $120,000 of the
Clydesdale Corporation has a cumulative temporary difference related to depreciation of $580,000 at December 31, 2020. This difference will reverse as follows: 2021, $42,000; 2022, $244,000; and 2023, $294,000. Enacted tax rates are 17% for 2021 and 2022, and 20% for 2023. Compute the amount
At the end of 2019, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting the following future taxable amounts.2020...........................$
Callaway Corp. has a deferred tax asset account with a balance of $112,500 at the end of 2020 due to a single cumulative temporary difference of $375,000. At the end of 2021, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2021 is $850,000. The
At December 31, 2020, Fell Corporation had a deferred tax liability of $340,000, resulting from future taxable amounts of $2,000,000 and an enacted tax rate of 17%. In May 2021, a new income tax act is signed into law that raises the tax rate to 20% for 2021 and future years. Prepare the journal
Jennifer Capriati Corp. has a deferred tax asset account with a balance of $75,000 at the end of 2019 due to a single cumulative temporary difference of $375,000. At the end of 2020, this same temporary difference has increased to a cumulative amount of $450,000. Taxable income for 2020 is
Kleckner Company started operations in 2016. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2020), Kleckner appears to have turned the corner and reported modest taxable income of $30,000.
Rode Inc. incurred a net operating loss of $500,000 in 2020. The tax rate for all years is 20%. Prepare the journal entries to record the benefits of the loss carryforward. Rode expects to return to profitability in 2021.
Assume the same information as E19.12, except that at the end of 2019, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $22,500.Instructionsa. Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely
Boey Company reported net income of $25,000 in 2021. It had the following amounts related to its pension plan in 2021: actuarial liability gain $10,000, unexpected asset loss $14,000, accumulated other comprehensive income (G/L) (beginning balance), zero. Determine for 2021(a) Boey’s other
The financial statements of M&S are presented in Appendix E. The company’s complete annual report, including the notes to the financial statements, is available online.InstructionsRefer to M&S’s financial statements and the accompanying notes to answer the following questions.a. What
Novotna Inc.’s only temporary difference at the beginning and end of 2019 is caused by a $3 million deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one-half of which is classified as a current asset) is due in equal installments in 2020
Addison Co. has one temporary difference at the beginning of 2020 of $500,000. The deferred tax liability established for this amount is $150,000, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: $100,000 in 2021, $200,000 in 2022, and $200,000 in
Youngman Corporation has temporary differences at December 31, 2020, that result in the following deferred taxes.Deferred tax liability related to depreciation difference.....................$38,000Deferred tax asset related to warranty liability......................................62,000Deferred
Nolan Corporation had the following tax information. In 2021, Nolan suffered a net operating loss of $480,000, which it elected to carryback. The 2021 enacted tax rate is 29%. Prepare Nolan?s entry to record the effect of the loss carryback. Taxable Income Tax Rate 35% Taxes Paid Year 2018 2019
During 2020, Kate Holmes Co.?s first year of operations, the company reports pretax financial income at $250,000. Holmes?s enacted tax rate is 45% for 2020 and 20% for all later years. Holmes expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary
Describe a “loss carryforward.” Discuss the uncertainty when it arises.
Andy McDowell Co. establishes a $100 million liability at the end of 2020 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2021. Also, at the end of 2020, the company has $50 million of temporary
Nadal Inc. has two temporary differences at the end of 2019. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Nadal?s accounting department has developed a schedule of future taxable and deductible amounts related to these
The differences between the book basis and tax basis of the assets and liabilities of Castle Corporation at the end of 2019 are presented below. It is estimated that the litigation liability will be settled in 2020. The difference in accounts receivable will result in taxable amounts of $30,000
The pretax financial income (or loss) figures for Jenny Spangler Company are as follows.2017.....................................$
Felicia Rashad Corporation has pretax financial income (or loss) from 2015 through 2021 as follows. Pretax financial income (loss) and taxable income (loss) were the same for all years since Rashad has been in business. In recording the benefits of a loss carryforward, assume that it is more
Spamela Hamderson Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. The tax rates listed were all enacted by the beginning of 2018. Instructions a. Prepare the journal entries for the years 2018?2021 to record income tax expense (benefit) and
Meyer reported the following pretax financial income (loss) for the years 2020–2022.2020........................$120,0002021........................(150,000)2022..........................180,000Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The
The pretax financial income (or loss) figures for Dan Lynch Company are as
Wangerin Company reported the following pretax financial income (loss) for the years 2018–2022.2018..........................$240,0002019............................350,0002020............................120,0002021..........................(570,000)2022............................180,000Pretax
Johnstone Co. purchased a put option on Ewing common shares on July 7, 2020, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2021. The following data are available with
What is the transaction price? What additional factors related to the transaction price must be considered in determining the transaction price?
The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2020, for $240. The call option is for 200 shares (notional value),
Use the information from BE17.1 but assume the bonds are purchased as an available-for-sale security. Prepare Garfield’s journal entries for(a) The purchase of the investment,(b) The receipt of annual interest and discount amortization,(c) The year-end fair value adjustment. (Assume a zero
Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. Instructions a. Indicate whether the bonds were purchased at a discount or at a premium. b. Prepare the adjusting entry to record
Garfield Company purchased, on January 1, 2020, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provides an 11% return. Prepare Garfield’s journal entries for(a) The purchase of the investment,(b) The receipt of annual interest and
Lexington Co. has the following securities outstanding on December 31, 2020 (its first year of operations). During 2021, Summerset Company stock was sold for $9,200, the difference between the $9,200 and the ?fair value? of $8,800 being recorded as a ?Gain on Sale of Investments.? The market
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.InstructionsUse the companies’ financial information to answer the following
On January 1, 2020, Dagwood Company purchased at par 6% bonds having a maturity value of $300,000. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in the held-to-maturity category.Instructionsa. Prepare the
On January 1, 2020, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Novotna Company uses the effective-interest method to amortize
Carow Corporation purchased on January 1, 2020, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for(a) The purchase of the investment,(b) The receipt
On January 1, 2020, Hi and Lois Company purchased 12% bonds having a maturity value of $300,000 for $322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Hi and Lois Company uses
Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Instructions (Round all computations to the nearest dollar.) a. Prepare entries necessary to classify the amounts into
On July 1, 2021, Fontaine Company purchased for cash 40% of the outstanding common stock of Knoblett Company. Both Fontaine Company and Knoblett Company have a December 31 year-end. Knoblett Company, whose common stock is actively traded in the over-the-counter market, reported its total net
Instar Company has several investments in the securities of other companies. The following information regarding these investments is available at December 31, 2020.1. Instar holds bonds issued by Dorsel Corp. The bonds have an amortized cost of $320,000 and their fair value at December 31, 2020,
Assume the same information as in E17.3 except that the securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows. Instructions a. Prepare the journal entry at the date of the bond purchase. b. Prepare the journal entries to record
On July 1, 2020, Selig Company purchased for cash 30% of the outstanding common stock of Spoor Corporation. Both Selig and Spoor have a December 31 year-end. Spoor Corporation, whose common stock is actively traded on the NASDAQ exchange, paid a cash dividend on November 15, 2020, to Selig
On January 1, 2020, Phantom Company acquires $200,000 of Spiderman Products, Inc., 9% bonds at a price of $185,589. Interest is received on January 1 of each year, and the bonds mature on January 1, 2023. The investment will provide Phantom Company a 12% yield. The bonds are classified as
Parnevik Company has the following securities in its investment portfolio on December 31, 2020 (all securities were purchased in 2020): (1) 3,000 shares of Anderson Co. common stock which cost $58,500, (2) 10,000 shares of Munter Ltd. common stock which cost $580,000, and (3) 6,000 shares of King
The following information is available for Barkley Company at December 31, 2020, regarding its investments. Instructions a. Prepare the adjusting entry (if any) for 2020, assuming no balance in the Fair Value Adjustment account at January 1, 2020. Neither of Barkley?s investments result in
McElroy Company has the following portfolio of investment securities at September 30, 2020, its most recent reporting date. On October 10, 2020, the Horton shares were sold at a price of $54 per share. In addition, 3,000 shares of Patriot common stock were acquired at $54.50 per share on
On December 21, 2020, Bucky Katt Company provided you with the following information regarding its equity investments. During 2021, Colorado Co. stock was sold for $9,400. The fair value of the stock on December 31, 2021, was Clemson Corp. stock?$19,100; Buff aloes Co. stock?$20,500. None of the
Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2019. Early in 2020, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto’s financial distress. In 2021, Soto returned
Brooks Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with a conservative dividend policy, resulted in
The following information relates to Moran Co. for the year ended December 31, 2020: net income $1,245.7 million; unrealized holding loss of $10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2019.
At December 31, 2020, the available-for-sale debt portfolio for Steffi Graf, Inc. is as follows. On January 20, 2021, Steffi Graf, Inc. sold security A for $15,100. The sale proceeds are net of brokerage fees. Instructions a. Prepare the adjusting entry at December 31, 2020, to report the
On January 1, 2020, Acker Inc. had the following balance sheet. The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fair value of Acker Inc.?s available-for-sale debt securities at December 31, 2020, was $190,000; its cost was
If the bonds in Question 8 are classified as available-for-sale and they have a fair value at December 31, 2020, of $3,604,000, prepare the journal entry (if any) at December 31, 2020, to record this transaction.
Assume the same information as E17.9 and that Steffi Graf, Inc. reports net income in 2020 of $120,000 and in 2021 of $140,000. Total holding gains (including any realized holding gain or loss) equal $40,000 in 2021.Instructionsa. Prepare a statement of comprehensive income for 2020, starting with
Castleman Holdings, Inc. had the following equity investment portfolio at January 1, 2020. During 2020, the following transactions took place. 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for $11 per
Fernandez Corp. invested its excess cash in securities during 2020. As of December 31, 2020, the securities portfolio consisted of the following common stocks. Instructions a. What should be reported on Fernandez?s December 31, 2020, balance sheet relative to these securities? What should be
Aranda Corporation made the following cash purchases of securities during 2020, which is the first year in which Aranda invested in securities.1. On January 15, purchased 10,000 shares of Sanchez Company’s common stock at $33.50 per share plus commission $1,980.2. On April 1, purchased 5,000
Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2020. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,600,000. Interest is paid on January 1.
On January 1, 2020, Roosevelt Company purchased 12% bonds, having a maturity value of $500,000, for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received January 1 of each year. Roosevelt’s business
The following are independent situations.Situation 1: Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2020. On June 30, Martinez declared and paid $75,000 cash dividends to all stockholders. On December 31,
Michek Company loans Sarasota Company $2,000,000 at 6% for 3 years on January 1, 2020. Michek intends to hold this loan to maturity and has the financial ability to do so. The fair value of the loan at the end of each reporting period is as follows.December 31,
Assume the same information as in IFRS17.12 except that Roosevelt has an active trading strategy for these bonds. The fair value of the bonds at December 31 of each year-end is as
Warren Co. purchased a put option on Echo common shares on January 7, 2020, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2020. The following data are available with respect to
Oregon Co. had purchased 200 shares of Washington Co. for $40 each this year (Oregon Co. does not have significant influence). Oregon Co. sold 100 shares of Washington Co. stock for $45 each. At year-end, the price per share of the Washington Co. stock had dropped to $35.InstructionsPrepare the
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