Homework for Chapter 16-3

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University of Nebraska, Omaha *

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3040

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Accounting

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May 15, 2024

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docx

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Homework for Chapter 16 Available points = 14 points. 1. On January 1, 2010, Ameen Company purchased a building for $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2012, the carrying value of the building was $30 million and its tax basis was $20 million. At December 31, 2013, the carrying value of the building was $28 million and its tax basis was $13 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2013 was $45 million. Required: a) Prepare the appropriate journal entry to record Ameen's 2013 income taxes (current income tax expense and deferred income tax expense). Assume an income tax rate of 40%. Current Income Tax Expense 16 Income tax payable 16 Deferred Income Tax Expense 2 Deferred Tax Liability 2 b) What is Ameen's 2013 net income? Pretax Income Tax $45M Income Tax Expense (18) Net Income $27M 2. For the year ended December 31, 2013, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2013 from Fidelity's records follows: Fidelity's income tax rate is 40%. At January 1, 2013, Fidelity's records indicated balances of zero and $12,000 in its deferred tax asset and deferred tax liability accounts, respectively. Required: a) Determine the amounts necessary to record income taxes for 2013 and prepare the appropriate journal entry. Current Income Tax Expense 360 Income Tax Payable 360 Deferred Income Tax Expense 19 Deferred Tax Asset 4 Deferred Tax Liability 22 b) What is Fidelity's 2013 net income?

$977-387 = $599,000 3. The information that follows pertains to Esther Food Products: At December 31, 2013, temporary differences were associated with the following future taxable (deductible) amounts: No temporary differences existed at the beginning of 2013. Pretax accounting income was $80,000 and taxable income was $15,000 for the year ended December 31, 2013. The tax rate is 40%. Required: Determine the amounts necessary to record income taxes for 2013 (current income tax expense and deferred income tax expense) and prepare the appropriate journal entry. Current Income Tax Expense 6000 Income Tax Payable 6000 Deferred Income Tax Expense 26000 Deferred Tax Asset 4800 Deferred Tax Liability 30800 4. The information that follows pertains to Richards Refrigeration, Inc.: At December 31, 2013, temporary differences existed between the financial statement carrying amounts and the tax bases of the following: No temporary differences existed at the beginning of 2013. Pretax accounting income was $200 million and taxable income was $145 million for the year ended December 31, 2013. The tax rate is 40%. Required: a) Determine the amounts necessary to record income taxes for 2013 (current income tax expense and deferred income tax expense) and prepare the appropriate journal entry.

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