The following information is for Hulk Gym's first year of operations. Amounts are in millions of...
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The following information is for Hulk Gym's first year of operations. Amounts are in millions of dollars. The enacted tax rate is 30% for the current year and for the foreseeable future. Rent collected in advance Taxable income Year y2 12 $72 Future Effects on Taxable Inc. y3 y4 y5 y6 Accounting income $60 Temporary difference: ($ 3) ($ 3) ($ 3) ($3) Future Tax Inc. Total ($ 12) Required (answer each question independently): 1. Two years of journal entries: a. Prepare the journal entry(ies) needed to record the income tax expense for the year y2. Show well-labeled computations. b. Assume that, in y3, accounting income is $80 million and taxable income is $77 million, with the reversal of the unearned rent being the only difference between book and taxable income. Prepare the journal entry (ies) needed to record income tax expense for the year y3. Show well-labeled computations. 2. Assume the "basic facts" above except that, at the end of y2, management expects that it is probable (i.e., more likely than not) that the firm will generate only $6 million of future taxable income. Prepare the journal entry(ies) needed to record the income tax expense for the year y2. Show well-labeled computations. The following information is for Hulk Gym's first year of operations. Amounts are in millions of dollars. The enacted tax rate is 30% for the current year and for the foreseeable future. Rent collected in advance Taxable income Year y2 12 $72 Future Effects on Taxable Inc. y3 y4 y5 y6 Accounting income $60 Temporary difference: ($ 3) ($ 3) ($ 3) ($3) Future Tax Inc. Total ($ 12) Required (answer each question independently): 1. Two years of journal entries: a. Prepare the journal entry(ies) needed to record the income tax expense for the year y2. Show well-labeled computations. b. Assume that, in y3, accounting income is $80 million and taxable income is $77 million, with the reversal of the unearned rent being the only difference between book and taxable income. Prepare the journal entry (ies) needed to record income tax expense for the year y3. Show well-labeled computations. 2. Assume the "basic facts" above except that, at the end of y2, management expects that it is probable (i.e., more likely than not) that the firm will generate only $6 million of future taxable income. Prepare the journal entry(ies) needed to record the income tax expense for the year y2. Show well-labeled computations.
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1 a To record the income tax expense for the year y2 the journal entry wo... View the full answer
Related Book For
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
Posted Date:
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