Slide 1Slide 2Slide 3Zoop Inc. (NOL)Zoop Inc. (Variation)Valis Corporation (NOL)Example: Revision of Future Tax RateSlide 8Review ProblemSlide 101Deferred Tax ExamplesNice to have on paper as we work problems during classProblems from 12th Ed PPTAcct 4142E19-1 South Carolina Corporation has one temporary difference at the end of 2007 that will reverse and cause taxable amounts of $55,000 in 2008, $60,000 in 2009, and $65,000 in 2010. South Carolina’s pretax financial income for 2007 is $300,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2007.Instructionsa) Compute taxable income and income taxes payable for 2007.b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007.South Carolina CorporationSouth Carolina Corporation3Columbia Corporation has one temporary difference at the end of 2007 that will reverse and cause deductible amounts of $50,000 in 2008, $65,000 in 2009, and $40,000 in 2010. Columbia’s pretax financial income for 2007 is $200,000 and the tax rate is 34% for all years. There are no deferred taxes at the beginning of 2007. Columbia expects to be profitable in the future. Instructionsa) Compute taxable income and income taxes payable for 2007.b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007.Columbia CorporationColumbia Corporation4Zoop Inc. incurred a net operating loss of $500,000 in 2007. Taxable income was $200,000 for 2005 and $200,000 for 2006. The tax rate for all years is 40%. Zoop elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward.Zoop Inc. (NOL)Zoop Inc. (NOL)5Now assume that it is more likely than not that the entire net operating loss carryforward will not be realized by Zoop Inc. in future years. Prepare all the journal entries necessary at the end of 2007.Zoop Inc. (Variation)Zoop Inc. (Variation)6Valis Corporation had the following tax information.Valis Corporation (NOL)Valis Corporation (NOL)Taxable Tax TaxesYear I ncome Rate Paid2004 300,000$ 35% 105,000$ 2005 325,000 30% 97,500 2006 400,000 30% 120,000 In 2007 Valis suffered a net operating loss of $450,000, which it elected to carry back. The 2007 enacted tax rate is 29%. Prepare Valis’s entry to record the effect of the loss carryback.7At the end of 2002, the corporate tax rate is changed from 40% to 35%. The new rate is effective January 1, 2004.The deferred tax account (1/1/2002) is as follows: Excess tax depreciation: $3 million Deferred tax liability: $1.2 millionRelated taxable amounts are expected to occur equally over 2003, 2004, and 2005.Provide the journal entry to reflect the change. Example: Revision of Future Tax RateExample: Revision of Future Tax Rate89Zurich Company reports pretax financial income of $70,000 for 2007. The following items cause taxable income to be different than pretax financial income. (1) Depreciation on the tax return is greater than depreciation on the income statement by $16,000. (2) Rent collected on the tax return is greater than rent earned on the income statement by $22,000. (3) Fines for pollution appear as an expense of $11,000 on the income statement.Zurich’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2007.Instructions Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2007.Review ProblemReview
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