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
there is significant difference between the average service tax collection per assessee in Pune zone and the average service tax collection per assessee in the country

Alan is an employee at ABC Pty Ltd (ABC). He has negotiated the following remuneration package with ABC: • salary of $300,000; • Payment of Alan''s mobile phone bill ($220 per mont

a. You are engineering a Leveraged-Buy-Out (LBO) of ACME Industries, an industrial bottle maker. After the LBO, the firm will be financed with 90% debt and 10% equity. Fred Farber,

In response to rising obesity, a number of pundits have proposed taxing corn syrup, an ingredient in most soda pop. Let's consider the market for corn syrup assuming this tax take

In May 2003, Gencorp acquired Sequa Corp.'s propulsion subsidiary ARC for $133million in cash and $11 million in transactions costs. Table below lists selected information about

Dan and Cheryl are married , file a joint return, and have no children. Dan , age 45, is a pharmaceutial salesman and Cheryl, age 42, is a nurse at a local hospital . Dan''s SSN is



Independence Standard Board (ISB) - This is private sector standard-setting body governing the independence of AUDITORs from their public company clients. It came about from discus

Investment T ax Credit A reduction in corporate income taxes is equal to a percent of the cost of a new asset in the year that the new asset is placed in the servic