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Chapter 19: Q8IFRS (page 1114)
Use the information for Rode Inc. given in IFRS19-7. Assume that it is probable that the entire net operating loss carryforward will not be realized in future years. Prepare the journal entry(ies) necessary at the end of 2017.
Income tax refund receivable is $140,000.
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Lincoln Company has the following four deferred tax items at December 31, 2017. The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority.
Temporary difference | Deferred tax asset | Deferred tax liability |
Rent collected in advance: recognized when a performance obligation is satisfied for accounting purposes and when received for tax purposes. | \(652,000 | |
Use of straight-line depreciation for accounting purposes and accelerated depreciation for tax purposes. | \)330,000 | |
Recognition of income on installment sales at the time of sale for accounting purposes and during period of collection for tax purposes. | \(64,000 | |
Warranty liabilities: recognized for accounting purposes at time of sale for tax purposes at time paid. | \)37,000 |
On Lincoln’s December 31, 2017, statement of financial position, it will report:
Question: What are the two basic requirements applied to the measurement of current and deferred income taxes at the date of the financial statements?
At the end of 2016, Lucretia McEvil Company has \(180,000 of cumulative temporary differences that will result in reporting the following future taxable amounts. 2017 \) 60,000 2018 50,000 2019 40,000 2020 30,000 \(180,000Tax rates enacted as of the beginning of 2015 are: 2015 and 2016 40% 2017 and 2018 30% 2019 and later 25% McEvil’s taxable income for 2016 is \)320,000. Taxable income is expected in all future years. Instructions (a) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there were no deferred taxes at the end of 2015. (b) Prepare the journal entry for McEvil to record income taxes payable, deferred income taxes, and income tax expense for 2016, assuming that there was a balance of $22,000 in a Deferred Tax Liability account at the end of 2015.
Homestake Mining Company is a 120-year-old international gold mining company with substantial gold mining operations and exploration in the United States, Canada, and Australia. At year-end, Homestake reported the following items related to income taxes (thousands of dollars).
Total current taxes | \( 26,349 |
Total deferred taxes | (39,436) |
Total income and mining taxes (the provision for taxes per its income statement) | \) (13,087) |
Deferred tax liabilities | \(303,050 |
Deferred tax assets, net of valuation allowance of \)207,175 | 95,275 |
\(207,775 | |
Note 6: The classification of deferred tax assets and liabilities is based on the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based on the estimated period of reversal. | |
Tax loss carry forwards (U.S., Canada, Australia, and Chile) | \)71,151 |
Tax credit carry forwards | \(12,007 |
Instructions
SpamelaHamderson Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.) Income (Loss) Tax Rate 2009 \( 29,000 30% 2010 40,000 30 2011 17,000 35 2012 48,000 50 2013 (150,000) 40 2014 90,000 40 2015 30,000 40 2016 105,000 40 2017 (60,000) 45 Year Pretax Income (Loss) Tax Rate 2015 \)120,000 34% 2016 90,000 34 2017 (280,000) 38 2018 220,000 38 The tax rates listed were all enacted by the beginning of 2015. Instructions (a) Prepare the journal entries for the years 2015–2018 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2017 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (b) Using the assumption in (a), prepare the income tax section of the 2017 income statement beginning with the line “Operating loss before income taxes.” (c) Prepare the journal entries for 2017 and 2018, assuming that based on the weight of available evidence, it is more likely than not that one-fourth of the benefits of the loss carryforward will not be realized. (d) Using the assumption in (c), prepare the income tax section of the 2017 income statement beginning with the line “Operating loss before income taxes.”
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