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E19-16B (Deferred Tax Asset, Change in Tax Rate, Prepare Section of Income Statement)Sky Time Media Corporation?s only temporary difference at the beginning and end of 2014 is caused by a $2.5 million litigation accrual that is expected to be settled in 2

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E19-16B (Deferred Tax Asset, Change in Tax Rate, Prepare Section of Income Statement)Sky Time Media Corporation?s only temporary difference at the beginning and end of 2014 is caused by a $2.5 million litigation accrual that is expected to be settled in 2016. The related deferred tax asset at the beginning of the year is $1,000,000. In the third quarter of 2014, a new tax rate of 45% is enacted into law and is scheduled to become effective for 2016. Taxable income for 2014 is $7,250,000, and taxable income is expected in all future years.;Instructions;(a) Determine the amount reported as a deferred tax asset at the end of 2014. Indicate proper classification(s).;(b) Prepare the journal entry (if any) necessary to adjust the deferred tax asset when the new tax rate is enacted into law.;(c) Draft the income tax expense portion of the income statement for 2014. Begin with the line ?Income before income taxes.? Assume no permanent differences exist.

 

Paper#75299 | Written in 18-Jul-2015

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