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Question;1599. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #1;Kooler, Inc., is a domestic corporation. It owns 100% of Texas, Inc., a;domestic corporation, 100% of Paris, a foreign corporation, and 45% of Iowa;Inc., a domestic corporation.;a.;Which;entities? incomes are included in Kooler?s combined GAAP financial;statements?;b.;How would;your answer change if Kooler instead owned 15% of Iowa?;1600. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #2;Bunker, Inc., is a domestic corporation. It owns 100% of Texas, Inc., a;domestic corporation, 100% of Paris, a foreign corporation, and 35% of Iowa;Inc., a domestic corporation.;a.;Which entities?;incomes are included in Bunker?s Federal consolidated income tax return?;b.;How would;your answer change if Bunker instead owned 15% of Iowa?;1601. CHAPTER 14?TAXES;ON THE FINANCIAL STATEMENTS Question PR #3;Rochelle, Inc., reported the following results for the current year.;Book income;(before tax);$500,000;Tax;depreciation in excess of book;25,000;Non-tax-deductible;warranty expense;17,500;Municipal bond;interest income;20,000;Determine Rochelle?s taxable income for the current year. Identify any;temporary or permanent book-tax differences.;1602. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #4;PaintCo Inc., a domestic corporation, owns 100% of BrushCo Ltd., an Irish;corporation. Assume that the U.S. corporate tax rate is 35% and the Irish rate;is 10%. PaintCo is permanently reinvesting BrushCo?s earnings outside the;United States under ASC 740-30 (APB 23). The corporations? book income;permanent and temporary book-tax differences, and current tax expense are as;follows. Determine PaintCo?s total tax expense reported on its financial;statements, its current tax expense (benefit), and its deferred tax expense;(benefit).;PaintCo;BrushCo;Book income;before tax;$600,000;$400,000;Permanent;differences;Meals & entertainment expense;40,000;?0?;Municipal bond interest income;(100,000);?0?;Temporary;differences;Tax > book depreciation;(100,000);?0?;Book > tax bad debt expense;20,000;?0?;1603. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #5;PaintCo Inc., a domestic corporation, owns 100% of BrushCo Ltd., an Irish;corporation. Assume that the U.S. corporate tax rate is 35% and the Irish rate;is 10%. PaintCo is permanently reinvesting BrushCo?s earnings outside the;United States under ASC 740-30 (APB 23). The corporations? book income;permanent and temporary book-tax differences, and current tax expense are as;follows. Provide the income tax footnote rate reconciliation for PaintCo using;both dollar amounts and percentages.;PaintCo;BrushCo;Book income;before tax;$600,000;$400,000;Permanent;differences;Meals & entertainment expense;40,000;?0?;Municipal bond interest income;(100,000);?0?;Temporary;differences;Tax > book depreciation;(100,000);?0?;Book > tax bad debt expense;20,000;?0?;1604. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #6;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ? Acc.;Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Determine the change in;Gator?s deferred tax assets for the current year.;1605. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #7;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Determine the net;deferred tax asset or net deferred tax liability at year end.;1606. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #8;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross Deferred;Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Determine the change in;Gator?s deferred tax liabilities for the current year.;1607. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #9;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($;27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Determine Gator?s change;in net deferred tax asset or net deferred tax liability for the current year;and provide the journal entry to record this amount.;1608. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #10;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Calculate Gator?s;current tax expense.;1609. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #11;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. Provide the journal;entry to record Gator?s current tax expense.;1610. CHAPTER;14?TAXES ON THE FINANCIAL STATEMENTS Question PR #12;Gator, Inc., is a domestic corporation with the following balance sheet for;book and tax purposes at the end of the year. Assume a 34% corporate tax rate;and no valuation allowance.;Tax Debit/(Credit);Book Debit/(Credit);Assets;Cash;$ 300;$ 300;Accounts;Receivable;5,000;5,000;Buildings;300,000;300,000;Acc.;Depreciation;(150,000);(80,000);Furniture;Fixtures;40,000;40,000;Acc.;Depreciation;(21,000);(15,000);Total Assets;$174,300;$250,300;Liabilities;Accrued;Litigation Expense;$ ?0?;($ 27,000);Note Payable;(116,000);(116,000);Total;Liabilities;($116,000);($143,000);Stockholder Equity;Paid in;Capital;($ 1,000);($ 1,000);Retained;Earnings;(57,300);(106,300);Total;Liabilities and;Stockholders Equity;($174,300);($250,300);Gator Inc.?s gross deferred tax assets and liabilities at the beginning of;Gator?s year are listed below.;Beginning of Year;Accrued;Litigation Expense;$21,000;Subtotal;$21,000;Applicable;Tax Rate;? 34%;Gross;Deferred Tax Asset;$;7,140;Building ?;Acc. Depreciation;($61,000);Furniture;fixtures ? Acc. Depreciation;(3,200);Subtotal;($64,200);Applicable;tax rate;? 34%;Gross;deferred tax liability;($21,828);Gator Inc.?s book income before tax is $6,300. Gator records two permanent;book-tax differences. It earned $250 in tax exempt municipal bond interest and;$460 in nondeductible meals and entertainment expense. What is Gator?s total;provision for income tax expense reported on its GAAP financial statement and;its book net income after tax?

 

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