Joined: 04 Oct 2010
Online Status: Offline Posts: 2
Posted: 04 Oct 2010 at 18:08 | IP Logged
Okay here are two questions. I thought I understood deferred taxes very well but these are creating a little doubt/confusion in my mind.
#1
Information for Johnson Inc. for the year 2009:
Reconciliation of pretax accounting income and taxable income:
Pretax accounting income
$186,000
Permanent differences
(14,100
)
171,900
Temporary difference-depreciation
(11,500
)
Taxable income
$160,400
Cumulative future taxable amounts all from depreciation temporary differences:
As of December 31, 2008 $12,600 As of December 31, 2009 $24,000
The tax rate was 48% for 2008 and 33% for 2009 and thereafter.
What should be the balance in Johnson's deferred tax liability account as of December 31, 2009? A. $24,000 B. $7,920 C. $8,920 D. None of these
I believe this should be B. The cumulative total at the end of 2009 of 24,000 * 33% rate for 2009 and so on. I think all the other stuff are distractors and they are only asking for the ending balance so there is no need to compute what was in the deferred tax liability account to determine the entry needed for the change.
This one I'm definatley confused on. #2
Information for Johnson Corp. for the year 2009:
Reconciliation of pretax accounting income and taxable income:
Pretax accounting income
$171,000
Permanent differences
(14,300
)
156,700
Temporary difference-depreciation
(12,400
)
Taxable income
$144,300
Cumulative future taxable amounts all from depreciation temporary differences:
As of December 31, 2008 $12,700 As of December 31, 2009 $25,500
The tax rate was 46% for 2008 and 32% for 2009 and thereafter.
What should Johnson report as the current portion of its income tax expense in the year 2009?
A. 46,676 B. 46,176 C. 54,720 D. None of these
I would pick D because I've tried multiple combonations and nothing seems to come to any of the answers. I don't know how to really solve I tried the following JE to help
Income Tax Expnese ??? Deferred Tax Liablity ??? Income Tax Payable ; 46,176 (144,300 * .32)
For the Deferred Tax Liablity I did this calcuation:
Ending Balance Needed at Dec 2009 8,160 (25,500 * .32) Less Balance Currently 5,842 (12,700 * < ="text/">formCheckList.addElement(new Check_Answer({ref_label:"14",name:"mc-ans-_5109737_1"} .46) Changed need &n bsp; &n bsp; &n bsp; 2318
So when I add 46,176 + 2318 I get an Income Tax Expnese 48,494, I am correct in sovling it this way? When I said I've tried combos I've tried multiplying the different cumulative amounts at differents rates and plugging them into this JE and they don't seem to come out to any of the answers.
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Topic: Deferred Tax
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