Step 1 Compute Current Provision

1. Open your saved Excel workbook you submitted to Canvas for Part I of this project. Make sure you have the final version that includes fully completed PINK
2. On the Trial Balance tab, make sure each of the accuracy checks calculated in red throughout the worksheet still show a result of zero.
3. You will ONLY be working with the ORANGE tabs for Part II of this project.
4. Click on the worksheet titled Current Provision.
   1. In column B, select the Permanent and Temporary book-tax differences you previously calculated on the Book-to-tax Rec tab (green cells).
   2. In column C, manually input the applicable book-tax differences you calculated in Part I (yellow cells).
      1. Hint - Favorable differences should be shown as negative amounts (since they reduce book income), and vice-versa for Unfavorable differences.
      2. Hint to avoid unintended typos, you should use an Excel formula to link the answers directly to the applicable cell in the Book-to-tax Rec tab.
5. Click on the worksheet titled State Adjustments.
   1. The state only allows 50% bonus depreciation on fixed asset additions, as opposed to the 100% Federal bonus depreciation allowance.
      1. Select the appropriate bonus depreciation allowances for state tax purposes (green cells).
      2. Input the Federal tax depreciation that you calculated in Part I (yellow cell). Try and use an Excel formula link to reduce inadvertent errors associated with manual data input.
      3. Indicate whether the adjustment should increase or decrease Federal taxable income to arrive at the allowable depreciation expense under the states income tax rules (green cells).
   2. Gnome purchased its municipal bond from a different state, so Gnome is not allowed to exclude its net municipal interest income when computing state taxable income.
      1. Indicate whether the required adjustments should increase or decrease Federal taxable income (green cells).
   3. The state does not allow for companies to deduct state income tax expense when computing state taxable income.
      1. Choose the Acct. Number associated with the state income tax expense that has been deducted in the Federal taxable income computation (green cell).
      2. Manually input the allowable state tax deduction (hint enter 0 if the state doesnt allow companies to take a state tax deduction).
      3. Indicate whether this adjustment related to state income tax expense should increase or decrease Federal taxable income (green cell).
6. Go back to the worksheet titled Current Provision.
   1. In column G, input the applicable state adjustments you calculated on the State Adjustments tab (4 yellow cells).
   2. Hint adjustments you indicated should be an Add-back should be shown as positive amounts, and vice-versa for adjustments that resulted in a Deduction to Federal taxable income.
   3. Hint to avoid unintended typos, you should use an Excel formula to link the answer directly to the applicable cell in the State Adjustments tab.
   4. The resulting Federal and State tax liabilities are shown in Purple in Rows 17 and 30. Beginning in cell F21, complete the following steps:
      1. Indicate whether Gnome has current Federal income tax expense or benefit, and then manually input the amount (positive for expense, and vice-versa for benefit). Try and link the amount using an Excel formula to avoid inadvertent data entry errors.
      2. Indicate whether Gnome has current state income tax expense or benefit, and then manually input the amount (positive for expense, and vice-versa for benefit). Try and link the amount using an Excel formula to avoid inadvertent data entry errors.
      3. Indicate whether the total current Fed/State expense/benefit results in Tax Expense (should be a positive number) or Tax Benefit (should be a negative number).
7. Once youve fully completed the above steps, the accuracy checkpoint on the Current Provision tab should show a variance within +/- 1.0 (cell G26).

Step 2 Compute Deferred Provision

1. Click on the worksheet titled Deferred Provision.
2. In column D, select the book-tax differences that should be incorporated into the deferred tax provision calculation.
   1. The first box represents the Federal deferred tax activity. The second box represents the State deferred tax activity.
3. In column F, manually input the current year book-tax differences. Favorable differences should be shown as negative amounts (since they represent future taxable differences), and vice-versa for Unfavorable differences.
   1. Hint to avoid unintended typos, you should use an Excel formula to link the answers directly to the applicable cell.
4. In column H, indicate whether each type of book-tax difference results in a Deferred Tax Asset or Liability, including the total amounts for both Federal and State.
5. The resulting Federal and State net deferred tax assets/(liabilities) are shown in Rows 18 and 34. Beginning in cell K7, complete the following steps:
   1. Indicate whether Gnome has deferred Federal income tax expense or benefit, and then manually input the amount (positive for expense, and vice-versa for benefit). Try and link the amount using an Excel formula to avoid inadvertent data entry errors.
   2. Indicate whether Gnome has deferred state income tax expense or benefit, and then manually input the amount (positive for expense, and vice-versa for benefit). Try and link the amount using an Excel formula to avoid inadvertent data entry errors.
   3. Indicate whether the total deferred Fed/State expense/benefit results in Tax Expense (should be a positive number) or Tax Benefit (should be a negative number).

6. Once youve fully completed the above steps, the accuracy checkpoint on the Deferred Provision tab should show a variance within +/- 1.0 (cell L12).

Step 3 Complete Income Tax Footnote Information

1. Click on the worksheet titled Income Tax Footnote.
2. In the Effective Tax Rate Reconciliation box, manually input Gnomes pre-tax book income/(loss). This amount is found on the Book-to-tax Rec tab and should be linked using an Excel formula to avoid inadvertent errors.
3. The rest of the Effective Tax Rate Reconciliation should automatically populate but take some time to look at the formulas in the pre-populated cells to ensure you understand where the information is coming from.
4. In the Tax Effects of Temporary Differences box, select the book-tax differences that created a Deferred Tax Asset, and those that created a Deferred Tax Liability.
5. In column G of the Tax Effects of Temporary Differences box, manually input the Federal and state tax-effected deferred amounts.
   1. For example, if your Fixed Assets Gross Deferred Tax Liability amount was (100,000) for Federal and (50,000) for state, then the total tax-effected Fixed Asset Deferred Tax Liability would be (100,000) * 21% Federal rate + (50,000) * 4.94% net state rate = (21,000) + (2,470) = (23,470).
   2. Deferred tax liabilities should be shown as negative amounts and vice-versa for deferred tax assets.
   3. Hint to avoid unintended typos, you should use an Excel formula to link the answer directly to the applicable cells in the Deferred Provision tab.
6. In the Tax Attribute Carryforwards box, select the two types of temporary differences that have resulted in deductions being carried forward to future tax years.
7. In column J of the Tax Attribute Carryforwards box, manually input the gross deduction amount that will be carried forward to next year. (Hint both amounts can be linked directly from the Book-to-tax Rec tab).
8. In column K of the Tax Attribute Carryforwards box, select the year any unutilized deductions will expire, following the expiration rules for the applicable tax attribute.
9. Once youve fully completed the above steps, the accuracy checkpoints on the Income Tax Footnote tab should show a variance within +/- 1.0 (cells C31 and G27).
10. Save the completed Excel workbook (ALL tabs should be completed) and upload to Canvas.

I have provided all the instructions. I cannot get the variance to 0 on the income tax footnote. If you could help me get the correct numbers to figure out the solution. All the tabs that are pink are 100% correct. I really just need help on the Orange tabs.