Details of this Paper

77. You have been assigned to compute the income t...

Description

Solution


Question

77. You have been assigned to compute the income tax provision for Motown Memories, Inc. (MM) as of December 31, 2011. The Company?s federal income tax rate is 34%. The Company?s Income Statement for 2011 is provided below: Motown Memories, Inc. Statement of Operations at December 31 2011 Net sales $50,000,000 Cost of sales 28,000,000 Gross profit 22,000,000 Compensation 2,000,000 Selling expenses 1,500,000 Depreciation and amortization 4,000,000 Other expenses 500,000 Total operating expenses 8,000,000 Income from operations $14,000,000 Interest and other income 1,000,000 Income before income taxes $15,000,000 You have identified the following permanent differences: Interest income from municipal bonds: $50,000 Nondeductible meals and entertainment expenses: $20,000 Domestic production activities deduction: $250,000 Nondeductible fines: $5,000 MM prepared the following schedule of temporary differences from the beginning of the year to the end of the year: Motown Memories, Inc. Temporary Difference Scheduling Template BOY Beginning Current EOY Ending Taxable (Favorable) Cumulative Deferred Year Cumulative Deferred Temporary Differences T/D Taxes (@ 34%) Change T/D Taxes (@ 34%) Non-current Accumulated depreciation (8,000,000) (2,720,000) (1,000,000) (9,000,000) (3,060,000) BOY Beginning Current EOY Ending Deductible (Unfavorable) Cumulative Deferred Year Cumulative Deferred Temporary Differences T/D Taxes (@ 34%) Change T/D Taxes (@ 34%) Current Allowance for bad debts 200,000 68,000 50,000 250,000 85,000 Reserve for warranties 100,000 34,000 20,000 120,000 40,800 Inventory ?263A adjustment 240,000 81,600 60,000 300,000 102,000 Total current 540,000 183,600 130,000 670,000 227,800 Non-Current Deferred compensation 50,000 17,000 10,000 60,000 20,400 Accrued pension liabilities 3,000,000 1,020,000 250,000 3,250,000 1,105,000 Total non-current 3,050,000 1,037,000 260,000 3,310,000 1,125,400 Total 3,590,000 1,220,600 390,000 3,980,000 1,353,200 a. Compute MM?s current income tax expense or benefit for 2011. b. Compute MM?s deferred income tax expense or benefit for 2011. c. Prepare a reconciliation of MM?s total income tax provision with its hypothetical income tax expense in both dollars and rates.

 

Paper#12978 | Written in 18-Jul-2015

Price : $25
SiteLock