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ACC - You have been hired as a consultant to advise on how to present the tax differences

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Question;You have been hired as a consultant to advise on how to present the tax differences between books and tax returns on the balance sheet of RFH company. There are a few questionable items which the current controller Mary Sims is confused as to proper presentation. The timing differences are1) $1,5000,000 as a result of depreciation timing difference (books S-L versus MACRS tax return).2) There also was a bad debt reserve increase from the prior year of $250,000.RFH Company is a manufacturing company who accrued $300,000 in warranty liability at year-end and could not deduct it on the tax return for this year but warranty will be paid out in the following year. A lawsuit in the amount of $450,000 was accrued on the books at year-end awaiting the final legal court judgment. Prior court cases have ruled that this $500,000 can be paid evenly over 3 years. You have to write a memo to Mary Sims advising her how to classify these temporary tax differences on her books at year-end. In your memo give FASB sources for her that validates your balance sheet presentation.Organize and interpret the findings of your research in one to two pages (12-point font, double-spaced).

 

Paper#39104 | Written in 18-Jul-2015

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