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Module 6: Problem 1. The following differences enter into the reconciliation of financial income




Question;Module 6: Problem 1.;The following differences;enter into the reconciliation of financial income and taxable income of Abbott;Company for the year ended December 31, 2012, its first year of operations. The;enacted income tax rate is 30% for all years.;Pretax;accounting income;$700,000;Excess;tax depreciation;(320,000);Litigation;accrual;70,000;Unearned;rent revenue deferred on the books but appropriately recognized in taxable;income;80,000;Interest;income from New York municipal bonds;(20,000);Taxable;income;$510,000;1. Excess tax depreciation will reverse equally;over a four-year period, 2013-2016.;2. It is estimated that the litigation;liability will be paid in 2016.;3. Rent revenue will be recognized during the;last year of the lease, 2016.;4. Interest revenue from the New York bonds is;expected to be $20,000 each year until their maturity at the end of 2016.;Instructions;(a) Prepare a schedule of future taxable and;(deductible) amounts.;(b) Prepare a schedule of the deferred tax;(asset) and liability.;(c) Since this is the first year of;operations, there is no beginning deferred tax asset or liability. Compute the;net deferred tax expense (benefit).;d);Prepare the journal entry to record income tax expense, deferred taxes;and the income taxes payable for 2012.;The May 31, 2012, balance per bank statement for Upton;Company was $7,200. The cash balance per books was $9,500. Outstanding checks amounted;to $800, and deposits in transit were $2,400. The bank statement contained an;NSF check for $500, a service charge for $25, and a debit memo for direct;payment of the telephone bill of $175.;Required;1) Prepare a bank reconciliation to determine the true cash balance at May 31;2012.;Bank Balance Upton;Company;Balance May 31, 3013 $7,200 Balance $9,500;Deposits in transit 2,400 NSF - 500;Outstanding Checks -800 Service;charge - 25;$8,800 $8,975;Direct;Pay 175;$8,800;Item;2012;2013;2014;2015;2016;Pretax Income;700,000;Excess Deprec;(80,000);(80,000);(80,000);(80,000);(80,000);Litigation;70,000;70,000;70,000;70,000;70,000;Unearned rent;80,000;Municipal Bonds;(20,000);(20,000);(20,000);(20,000);(20,000);Taxable Income;600,000;610,000;Tax;.30;.30;.30;.30;.30;Tax Payable;135,000;Tax Deferred;45,000;30,000;30,000;183,000


Paper#37885 | Written in 18-Jul-2015

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