Determine the tax liability amount, Taxation

Billsby Corporation had a tax liability for 20X7 of $20,000 based on a tax rate of 40%, but the accounting staff needs your help in determining the tax expense and deferred tax amounts for 20X7. The enacted tax rates for the future periods are 35% for 20X8 - 20Y2, and then 30% for 20Y3 - 20Y6. The company does not believe that temporary differences can be reasonably projected beyond those periods. The taxable income for 20X8 was $100,000. Billsby also owned a 30% interest in Windrop, Inc. which reported income of $50,000 and $60,000 in 20X7 and 20X8, respectively. Billsby received dividends of $5,000 and $8,000 from Windrop for 20X7 and 20X8, respectively. Billsby expects this pattern of earnings and dividends to continue over the next ten years. Billsby estimated warranty expense to be $7,500 in 20X7 and $10,000 in 20X8. Actual warranty cost for the two years was $6,000 and $12,000, respectively. The bad debts expense recognized on the income statement was $15,000 in 20X7 and $20,000 in 20X8. Actual bad debt write-offs per the tax return were $10,000 in 20X7 and $15,000 in 20X8. On January 1, 20X8 Billsby also received $30,000 of rent in advance covering a two year rental agreement, and $5,000 for interest income on municipal bonds (classified as held-to-maturity securities). The bonds mature in 20Y0.

Other data with respect to Billsby's depreciation expense calculations is as follows:

348_Determine the Tax Liability Amount.png

Required:

a. Determine the tax expense and the deferred tax amounts for 20X7 and 20X8.  Be sure to separate current and long-term amounts and to present amounts before and after netting.

b. Determine the tax liability amount for 20X8.

c. Prepare all necessary journal entries for the two year period (20X7 - 20X8).

d. Prepare a partial income statement for 20X7 showing earnings before tax, provision for income tax, and net income. 

(A good example of this format would be schedule M-1 from a corporate income tax return)

Posted Date: 2/27/2013 5:18:44 AM | Location : United States







Related Discussions:- Determine the tax liability amount, Assignment Help, Ask Question on Determine the tax liability amount, Get Answer, Expert's Help, Determine the tax liability amount Discussions

Write discussion on Determine the tax liability amount
Your posts are moderated
Related Questions
Critically evaluate overseas experiences with this form.

Tax Payable or Tax Credit Stuart's Guitars, which has a company tax rate of 30%, is planning to sell one of its old lathes. The machine, purchased 5 years ago for $50,000, had


Income Tax and Investment Calculator Your task is to produce a Java program, which can calculate income tax and investment growth based on the yearly income/salary of an indiv

Justin's parents operate a restaurant business through a family trust, The Pepper Family Trust, which had the following receipts and expenses for the year ended 30 June 2011 (the b


An unsecured short-term loan, generally issued to finance short-term liabilities, which gives the debt holders (bondholders) some level of tax choice on the earnings from their deb

do you offer tutoring services for graduate accounting students?

can you help with tax research assignment

Wyoming Coal Company is interested in buying a machine for $40,000, which it will depreciate uniformly over a four-year period. An analysis of the life expectancy of such machines