Helon Corp. is a private company reporting under ASPE. Helon Corp. has selected to use the taxes
Question:
Helon Corp. is a private company reporting under ASPE. Helon Corp. has selected to use the taxes payable method. Accounting income for 20X5 is $280,000. The following additional information is available for Helon Corp. for 20X5:
a. Depreciation expense is $80,000 whereas CCA is $98,000.
b. The income statement reflects $48,000 of rental revenue; the rental revenue taxable for the year is $8,000.
c. A political contribution was made in 20X5 in the amount of $20,000 that has been expensed on the income statement.
d. Helon Corp. expensed $12,000 of eligible meal and entertainment expenses during 20X5.
e. Helon Corp.’s tax rate is 25%.
Required:
1. Provide the journal entry to record income taxes for 20X5. Show all supporting calculations.
2. State whether Helon Corp. has any temporary differences and if so, what they are and why.
3. Refer to your answers to requirements 1 and 2. How do you reconcile the fact that Helon Corp. has temporary differences that were incorporated into your calculations, and yet the company uses the taxes payable method?
4. Provide two reasons to support the argument that the taxes payable method is preferable over the future income taxes method.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel