Chapter 18 Solutions

EXERCISE 18-1 (10-15 minutes) Add or deduct from bookkeeping pay (a)2deduct (b)1add (c)3add (d)1add (e)2deduct (f)2deduct (g)1add (h3deduct (i)3deduct (j)1add (k)1add (l)1add EXERCISE 18-3 (15-20 minutes) (an) Accounting income$105,000 Permanent contrasts: Non-deductible fines 11,000 116,000 Timing contrasts: Excess of CCA over amortization (16,000) Excess lease gathered over lease earned? 24,000 Taxable income$124,000 Current annual charges †30% $37,200 (b) Deductible Balance(Taxable)Future TaxCurrent SheetTemporaryTax AssetLong-AccountDifferencesXRate(Liability)TermPP and E($16,000)*30%($4,800) LT Unearned Rent income 24,00030% 7,200C Future personal expense resource, Dec. 31, 20092,400 Future personal expense resource before modification 0 Incr. in future personal duty resource and future annual tax break for 2009$2,400 *Carrying sum and assessment premise are not given in the activity, just the net contrast (c)Current Income Tax Expense37,200 Income Tax Payable37,200 Future Income Tax Asset? 7,200* Future Income Tax Benefit2,400 Future Income Tax Liability? 4,800* *or a net charge to Future Income Tax Asset of $2,400 Because of a level assessment rate, these sums can be accommodated: $24,000 †$16,000) X 30% = $7,200 + ($4,800). EXERCISE 18-3 (Continued) (d)Income before salary taxes$105,000 Income charge cost Current$37,200 Future advantage? (2,400)? 34,800 Net income$70,200 (e) Divided by Accounting @ 30% Income Accounting salary $ 105,000 31,500 30. 0% Non-deductible fines 11,000 3,300 3. 1% 34,800 33. 1% Effective assessment rate ($34,800/$105,000)33. 1% (f)Current resources Future personal expense asset$7,200 Non-Current liabilities Future Income Tax Liability4,800 EXERCISE 18-9 (15-20 minutes) (a) Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAssetDec. 31, 2008AmountBasisDifferencesRate(Liability) Warranty liability($130,000)$0 $130,000 25%$32,500 Future personal duty resource, December 31, 200832,500 Future annu al assessment resource before modification 0 Increase in future annual expense resource and future annual tax break for 2008$32,500 Future years Total200920102011 Deductible impermanent contrast Warranty obligation $130,000 $50,000 $35,000 $45,000 Tax rate instituted for the year 25%25%25% Future expense resource $32,500 $12,500 $8,750 $11,250 EXERCISE 18-9 (Continued) (b)2008 Accounting income$135,000Permanent contrasts:- 0-Timing distinction: Warranty cost > guarantee costs acquired 130,000 Taxable pay 265,000 Current personal charges †25%$66,250 (c) Current Income Tax Expense66,250 Income Tax Payable 66,250 Future Income Tax Asset32,500 Future Income Tax Benefit32,500 (d)Income before pay taxes$135,000 Income charge cost Current$66,250 Future advantage? (32,500) 33,750 Net income$101,250 EXERCISE 18-15 (40-45 minutes) (a) Basic Calculations of Capital Cost Allowance, Amounts and Balances: C-B (A)(B)A †B(C)Timing YearBaseCCAUCCAmort. NBVDifference 2007 $600,000 X 40 % X . $ 120,000 $ 480,000 $120,000$480,000$0 2008 480,000 X 40 % 192,000 288,000 120,000360,000(72,000) 2009 288,000 X 40 % 115,200 172,800 120,000240,0004,800 2010 172,800 X 40 % 69,120 103,680 120,000120,00050,880 2011 103,680 X 40 % 41,472 62,208120,000078,528 $537,792 (b) 20072008200920102011 Accounting salary $ 340,000 $340,000 $ 340,000 Timing distinction †(72,000) 4,800 50,880 78,528 Taxable pay $ 340,000 $268,000 $344,800 $390,880 $ 418,528 X 34 %X 34 %X 34 %X 34 %X 34 %Income charges payable$115,600$91,120$117,232$132,899$142,300 EXERCISE 18-15 (Continued) (c) and (d) 2007 Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2007AmountBasisDifferencesRate(Liability) Property Plant and Equipment$480,000 $480,000 034%$0 Future personal assessment resource/risk, December 31, 20070 Future annual duty resource/obligation before modification 0 Increase in future personal expense obligation and future personal expense cost for 2007$0 Curre nt Income Tax Expense115,600 Income Taxes Payable? 115,600 ($340,000 X 34%) section (an) EXERCISE 18-15 (Continued) (c) and (d) proceeded with 008 Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2008AmountBasisDifferencesRate(Liability) Property Plant and Equipment$360,000$288,000 (72,000)34%($24,480) Future personal assessment risk, December 31, 2008(24,480) Future annual duty obligation before modification 0 Increase in future annual expense risk and future annual expense cost for 2008($24,480) Current Income Tax Expense91,120 Income Taxes Payable? 91,120 ($268,000 X 34%) section (a) Future Income Tax Expense24,480 Future Income Tax Liability? 24,480 EXERCISE 18-15 (Continued) (c) and (d) proceeded with 2009Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2009AmountBasisDifferencesRate(Liability) Property Plant and Equipment$240,000$172,800 ($67,200)34%($22,848) Future annual duty obligation, Dece mber 31, 2009(22,848) Future personal assessment risk before alteration (24,480) Decrease in future annual duty risk and future annual tax break for 2009$1,632 2009 Current Income Tax Expense117,232 Income Taxes Payable? 117,232 ($344,800 X 34%) section (a) Future Income Tax Liability1,632 Future Income Tax Benefit? 1,632 EXERCISE 18-15 (Continued) (c) and (d) proceeded with 2010 Balance DeductibleSheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2010AmountBasisDifferencesRate(Liability) Property Plant and Equipment$120,000$103,680 ($16,320)34%($5,549) Future annual assessment obligation, December 31, 2010(5,549) Future personal duty risk before modification (22,848) Decrease in future personal assessment obligation and future annual tax reduction for 2010$17,299 2010 Current Income Tax Expense132,899 Income Taxes Payable? 132,899 ($390,880 X 34%) section (a) Future Income Tax Liability17,299 Future Income Tax Benefit? 17,299 EXERCISE 18-15 (Continued) (c) and (d) proceeded with 2011 Balance DeductibleSheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2011AmountBasisDifferencesRate(Liability) Property Plant and Equipment$0$62,208 $62,20834%$21,151 Future annual duty resource, December 31, 201121,151 Future personal assessment risk before modification (5,549) Increase in future personal assessment resource and future annual tax reduction for 2011$26,700 2011 Current Income Tax Expense142,300 Income Taxes Payable? 142,300 ($418,528 X 34%) section (a) Future Income Tax Liability5,549* Future Income Tax Asset21,151* Future Income Tax Benefit? 26,700 *Alternately, a charge to Future Tax Asset26,700 EXERCISE 18-15 (Continued) (e) 2007Current Income Tax Expense115,600 Income Taxes Payable? 115,600 ($340,000 X 34%) 2008 Current Income Tax Expense91,120 Income Taxes Payable? 91,120 ($268,000 X 34%) 2009 Current Income Tax Expense117,232 Income Taxes Payable? 117,232 ($344,800 X 34%) 2010 Current Income Tax Expense132,899 Incom e Taxes Payable? 132,899 ($390,880 X 34%) 2011 Current Income Tax Expense142,300 Income Taxes Payable? 142,300 ($418,528 X 34%) PROBLEM 18-9 Part 1. (a) Mixed expense rates Future years 20092010201120122013Total Future available sums ($300) ($300) ($300) ($200) ($100) ($1,200) Tax rate ordered for the year 30%30%30%35%35%Future assessment (risk) ($90) ($90) ($90) ($70) ($35) ($375) Future years 20092010201120122013Total Future deductible sums $1,800 Tax rate established for the year 30%30%30%35%35% Future duty resource †††$ 630 †$ 630 PROBLEM 18-9 (Continued) Part 1. (a) Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2008Amount*Basis*DifferencesRate(Liability) Property Plant and Equipment($1,200)Mixed($375) Litigation Liability1,800Mixed630 Future annual expense resource, December 31, 2008255Future personal assessment risk before change (500) Increase in future personal duty resource and future personal tax cut for 2008 $755 * not given in the issue Part 1. part (b) Current Income Tax Expense1,200 Income Tax Payable1,200 ($4,000 X 30%) Future Income Tax Asset/Liability755 Future Income Tax Benefit755* *Alternately: Future Income Tax Asset630 Future Income Tax Liability125 Future Income Tax Benefit755 PROBLEM 18-9 (Continued) Part 2. (a) Mixed assessment rates Future years 2009201020112012Total Future available sums ($400) ($400) ($400) ($400) ($1,600) Tax rate established for the year 30%30%30%35%Future expense (obligation) ($120) ($120) ($120) ($140) ($500) Future years 2009201020112012Total Future deductible sums $3,000 Tax rate instituted for the year 30%30%30%35% Future duty resource ††$900 †$900 PROBLEM 18-9 (Continued) Part 2. (a) Balance Deductible Sheet (Taxable) Future Tax AccountCarryingTaxTemporaryTaxAsset Dec. 31, 2008Amount*Basis*DifferencesRate(Liability) Property Plant and Equipment($1,600)Mixed($500) Litigation Liability3,000Mixed900 Future personal duty resource, Dec ember 31, 2008400 Future annual assessment resource before alteration 600Decrease in future annual duty resource and future annual expense cost for 2008$200 * not given in the issue Part 2. part (b) Current Income Tax Expense1,200 Income Tax Payable1,200 ($4,000 X 30%) Future Income Tax Expense200* Future Income Tax Asset200* *Alternately: Future Income Tax Expense200 Future Income Tax Asset300 Future Income Tax Liability500 PROBLEM 18-9 (Continued) (c) Part 1 †All monetary record related records are non-current Pirates Corp. Monetary record December 31, 2008 Non-current resources Future annual duty asset$255 Part 2 †All accounting report related records are non-current Eagles Corp. Monetary record December 31, 2008Non-current resources Future personal assessment asset$400 PROBLEM 18-12 (a)2007 Income Tax Refund Receivableâ€20047,500 ($25,000 X 30%) Income Tax Refund Receivableâ€200518,000 ?($60,000 X 30%) Income Tax Refund Receivableâ€200632,000 ($80,000 X 40%) C urrent Income Tax Benefit (Due to Loss Carryback)57,500 Note:An adequate option is to record just a single Income Tax Refund Receivable record for the measure of $57,500. Future Income Tax Asset18,000 Future Income Tax Benefit (Due to Los