1. Assume the following facts for RTY Corporation for Year 1. Assume the following facts for RTY...
Question:
1. Assume the following facts for RTY Corporation for Year 1.
Assume the following facts for RTY Corporation for Year 1.
RTY recorded $2,300 of book income.
At the end of the year, RTY had accumulated depreciation for book purposes of $10,000
and accumulated depreciation for tax purposes of $15,000. As of the beginning of the
year, the accumulated depreciation balances were $8,000 and $12,000, respectively. RTY paid premiums for officer life insurance of $500.
RTY established a warranty reserve of $1,500.
RTY’s reserve for obsolete inventory decreased from $3,750 to $1,950.
Assume a statutory income tax rate of 35 percent.
- What are RTY's permanent items?
- What are RTY's changes in temporary differences?
c. What is RTY's current tax liability?
d. What is the journal entry to record RTY's current tax liability?
- What is the temporary difference related to depreciation at the end of Year 1? Is it a deductible temporary difference or a taxable temporary difference?
f. What amount of deferred tax asset or liability should be recorded at year end related to depreciation?
g. What is the journal entry to book deferred tax expense?
h. What is the total provision for income tax?
2. Locate the Lumentum Holdings 10-K for FY2019 and answer the following questions:
- Why was the amount of tax paid different than the Company's FY19 tax expense?
- How much was the valuation allowance at FY2019?
- What deferred tax assets is the valuation allowance offsetting?
3. Find the world’s largest valuation allowance in a 10-K
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach