Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s...

  

Transcribed Image Text:

Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s Year 2 financial statements. Kent has been tasked with reviewing differences related to Aldridge's financial statements versus its tax forms from Year 1 in order to prepare for the Year 2 audit. After reading through the workpapers gathered from the company's financial reporting group, Wesley prepares notes shown in the exhibit to discuss with his manager. Use the information contained in the exhibit to fill out the tables below. Select the answers from the option lists provided. 1. For each of the items listed above, populate the table below: A B C Deferred Tax Asset 1 Temporary or (DTA) or Deferred Tax Item Permanent Difference Liability (DTL) 2 Depreciation 3 Life insurance payout 4 Fine to the IRS 5 Royalties received 6 Bad debt expense 2. What is the journal entry associated with the transactions above for Year 1? Account Name Debit Credit Income Tax Expense 123 123 123 123 Change in DTA 123 123 Change in DTL Income Tax Payable 123 123 3. What is the journal entry associated with the transactions above for Year 2? Account Name Debit Credit 123 123 Income Tax Expense 123 123 Change in DTA 123 123 Change in DTL 123 123 Income Tax Payable Kent Wesley is a junior member of the external audit team hired to audit Aldridge Inc.'s Year 2 financial statements. Kent has been tasked with reviewing differences related to Aldridge's financial statements versus its tax forms from Year 1 in order to prepare for the Year 2 audit. After reading through the workpapers gathered from the company's financial reporting group, Wesley prepares notes shown in the exhibit to discuss with his manager. Use the information contained in the exhibit to fill out the tables below. Select the answers from the option lists provided. 1. For each of the items listed above, populate the table below: A B C Deferred Tax Asset 1 Temporary or (DTA) or Deferred Tax Item Permanent Difference Liability (DTL) 2 Depreciation 3 Life insurance payout 4 Fine to the IRS 5 Royalties received 6 Bad debt expense 2. What is the journal entry associated with the transactions above for Year 1? Account Name Debit Credit Income Tax Expense 123 123 123 123 Change in DTA 123 123 Change in DTL Income Tax Payable 123 123 3. What is the journal entry associated with the transactions above for Year 2? Account Name Debit Credit 123 123 Income Tax Expense 123 123 Change in DTA 123 123 Change in DTL 123 123 Income Tax Payable