The Ambrosia Corporation's lead accountant shows the following info:
On Jan 1, 2012, Ambrosia purchased a bottling machine for $800000
A) Straight-line basis depreciation for 5 years for tax purposes
B) Half year convention for 8 years for financial reporting (See Appendix 11A)
C) Tax-exempt municipal bonds yielded interest of $150000 in 2013
D) Pretax financial income is $2300000 in 2012 and $2400000 in 2013
E) The company recognized an extraordinary gain of $150000 in 2013 (which is fully taxable)
F) Taxable income is expected in future years with an expected tax rate of 35%
Your tutorial is attached in Excel (click in cells to see computations). It shows how to get financial income subject to tax and taxable income. It should include the ...
Your tutorial is attached in Excel (click in cells to see computations). It shows how to get financial income subject to tax and taxable income. It should include the journal entry to record taxes payable, the increase to deferred tax liability and tax expense. It has a schedule showing depreciation book and tax differences in all nine years of the asset's life and the activity in deferred taxes in all nine years so you can "see" the full view of the situation and how the deferred taxes rise and fall. The balance sheet for 2013 is shown as well as the bottom of the income statement to show how the extraordinary gain would be handled separating out the taxes on it.