Sherrod, Incorporated, reported pretax accounting income of $80 million for 2024. The following information relates to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sherrod, Incorporated, reported pretax accounting income of $80 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $5 million. The installment receivable account at year-end 2024 had a balance of $6 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $76 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions): 2023 2024 2025 Income Statement $ 19 Tax Return $ 25 Difference $ (6) (13) 32 KITI 2026 19 8 $ 76 $ 76 11 0 d. For tax purposes, warranty expense is deducted when costs are paid. The balance of the warranty liability was $2 million at the end of 2023. Warranty expense of $6 million is recognized in the income statement in 2024. $4 million of cost is paid in 2024, and another $4 million of costs are anticipated to be paid in 2025. At December 31, 2024, the warranty liability is $4 million (after adjusting entries). e. In 2024, Sherrod accrued an expense and related liability for estimated paid future absences of $10 million relating to the company's new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($8 million in 2025; $2 million in 2026). f. During 2023, accounting income included an estimated loss of $6 million from having accrued a loss contingency. The loss is paid in 2024, at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2024, were $2.00 million and $1.75 million, respectively. The enacted tax rate is 25% each year. Required: 1. Determine the amounts necessary to record income taxes for 2024, and prepare the appropriate journal entry. 2. What is the 2024 net income? 3. Show how any deferred tax amounts should be classified and reported in the 2024 balance sheet. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the 2024 net income? Note: Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Net income for 2024 million < Required 1 Required 3 > Sherrod, Incorporated, reported pretax accounting income of $80 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $5 million. The installment receivable account at year-end 2024 had a balance of $6 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $76 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions): 2023 2024 2025 Income Statement $ 19 Tax Return $ 25 Difference $ (6) (13) 32 KITI 2026 19 8 $ 76 $ 76 11 0 d. For tax purposes, warranty expense is deducted when costs are paid. The balance of the warranty liability was $2 million at the end of 2023. Warranty expense of $6 million is recognized in the income statement in 2024. $4 million of cost is paid in 2024, and another $4 million of costs are anticipated to be paid in 2025. At December 31, 2024, the warranty liability is $4 million (after adjusting entries). e. In 2024, Sherrod accrued an expense and related liability for estimated paid future absences of $10 million relating to the company's new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($8 million in 2025; $2 million in 2026). f. During 2023, accounting income included an estimated loss of $6 million from having accrued a loss contingency. The loss is paid in 2024, at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2024, were $2.00 million and $1.75 million, respectively. The enacted tax rate is 25% each year. Required: 1. Determine the amounts necessary to record income taxes for 2024, and prepare the appropriate journal entry. 2. What is the 2024 net income? 3. Show how any deferred tax amounts should be classified and reported in the 2024 balance sheet. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the 2024 net income? Note: Enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Net income for 2024 million < Required 1 Required 3 >
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Sherrod, Inc., reported pretax accounting income of $76 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from...
-
What is the payback period for a project that has an initial investment of $117,000 and $10,000 net cash inflow in the first year, with a $1,000 increase in net cash inflows each year thereafter for...
-
Identify compounds A through D in the following equations: (a) (b) (c) (d) CH,O CCI gyodine Compound A OH . CH,Mgl (I equiv), diethyl ether CH CCH2CH COCH2CH 2 Ho (a lactone, CGHiO2) COH heat ...
-
True Or False To prove private nuisance, a plaintiff must show that the defendants conduct was intentional, negligent, or abnormally dangerous.
-
Define boiler according to IBR. Classify mountings into safety fittings and control fittings.
-
Off Road manufactures auto roof racks in a two-stage process that includes shaping and plating. Steel alloy is the basic raw material of the shaping process. The steel is moulded according to the...
-
If information is reliable, does that guarantee its credibility as well?
-
What guidelines should MNCs must be aware of while doing business in China?
-
You work for a young and fast growing investment company. In order to increase efficiency in your team, you hand-picked three portfolios that you mix and match and then offer to your clients. You can...
-
a) Consider a compound option that is a call on a put. Does this compound option cost less than the put? Explain your answer. b) You recently purchased and now hold an up-and-out put option. You now...
-
Perform a 3-stage DuPont analysis. Note that this needs appropriate analysis, not just a calculation. Comment on any areas of strength or weakness of the company, based on your results of Steps 2 and...
-
Oyster Industries buys land for $180,000. Oyster pays $5,000 in back property taxes and title and attorney fees equalling $2,000. It costs $4,400 to have the land graded. Then they paid $20,000 for...
-
} 6. What is the output of the following code sequence? Point 5 class X { int a; X(int i) (ami;) class Y extends X { int b; Y(int i, int j) { super(j); b=i; } } class SupSubRef { public static void...
-
Harvey Penick Tennies Academy held investment in trading securities with a fair value of $55,000 at December 31, 2014. These investments cost Harvey Penick $47,000 on January 1, 2014. What is the...
-
Vectors are drawn from the center of a regular n-sided polygon in the plane to the vertices of the polygon. Show that the sum of the vectors is zero.
-
Problem Decide whether the sampling method is independent or dependent. Then determine whether the response variable is qualitative or quantitative. (a) Joliet Junior College decided to implement a...
-
Using the data from Table 2, construct a \(95 \%\) confidence interval estimate of the mean difference, \(\mu_{d}\). By Hand Approach Step 1 Compute the differenced data. Because the sample size is...
-
In the Spacelab Life Sciences 2 payload, 14 male rats were sent to space. Upon their return, the red blood cell mass (in milliliters) of the rats was determined. A control group of 14 male rats was...
Study smarter with the SolutionInn App