HOMEWORK CHAPTER 19 – GROUP 8

MEMBERS’ NAME: Nguyễn Như Thành 11184485 – Trần Phương Thanh 11184465

Luyện Minh Thư 11184753 – Ngô Thị Thanh Thủy 11184869

Kiều Thu Trà 11184954 – Nguyễn Thu Trà 11184965

DUE DATE : Aug 9, 2020

E19.2:

a, Compute taxable income for 2019:

Pretax financial income for 2019 $ 300,000

Temporary differences:

Less: Excess of tax depreciation over book depreciation 40,000

Add: Rent received in advance 20,000

Taxable income for 2019 $280,000

b,

Temporary Future Taxable Tax Rate Deferred Tax

Difference (Deductible)
(Asset) Liability
Amounts

Depreciation 40,000 20% 8,000

Rent Revenue (20,000) 20% (4,000)
Totals 20,000 (4,000) 8,000

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 Date Account Titles Debit Credit
2019 Income Tax Expense 60,000

Dec. 31 Deferred Tax Asset 4,000

Deferred Tax Liability 8,000

Income Tax Payable (280,000 x 20%) 56,000

c.

Date Account Titles Debit Credit

2020 Income tax expense 67,000

Dec 31 Deferred tax liability 2,000

Income tax payable (325,000 x 20%) 65,000

Deferred tax asset 4,000

Temporary Future Taxable Tax Rate Deferred Tax

Difference (Deductible) (Asset) Liability

Amounts
Depreciation 30,000 20% 6,000
Rent Revenue 0 20% 0
Total 30,000 0 6,000

Deferred tax liability at the end of 2020: $6,000

Deferred tax liability at the beginning of 2020: 8,000

Deferred tax expense (benefit) for 2020 (2,000)

Deferred tax asset at the end of 2020: 0

Deferred tax asset at the beginning of 2020: 4,000

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 Deferred tax expense (benefit) for 2020 4,000

E19.9:

Temporary diferrence Amount

(Asset) Liability
1. Excess of tax depreciation over book depreciation $200,000

2. Accrual, for book purposes, of estimated loss

contingency from pending lawsuit that is expected to be (50,000)

settled in 2020. The loss will be deducted on the tax

return when paid

3. Accrual method used for book purposes and installment

method used for tax purposes for an isolated installment 225,000

sale of an investment

Totals $(50,000) $425,000

Net liability $375,000

Company should classify deferred tax accounts as a net non-current amount on the balance

sheet. That is, deferred tax assets and deferred tax liabilities are separately recognized and

measured and then off-set on the balance sheet. The net deferred tax liability of $375,000 is

therefore reported in the non-current liabilities section of the balance sheet.

FASB notes that determining when a temporary difference reverses is often difficult. In

addition, the scheduling of the reversals to determine current versus non-current is complex

and costly, and provides limited usefulness to the financial statement reader. As a result, the

Board decided to classify all deferred taxes as non-current.

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E19.10:

a. The beginning cumulative temporary difference which will result in future taxable amounts

$30,000 ÷ 20% = $150,000

The beginning cumulative temporary difference which will result in future deductible amounts

$10,000 ÷ 20% = $50,000

*The difference in future taxable amounts

Cumulative temporary difference at 12/31/20

which will result in future taxable amounts $230,000

Cumulative temporary difference at 1/1/20

which will result in future taxable amounts. 150,000

Originating difference in 2020 which will

result in future taxable amount $ 80,000

*The difference in future deductible amounts

Cumulative temporary difference at 12/31/20

which will result in future deductible amounts............. $ 95,000

Cumulative temporary difference at 1/1/20

which will result in future deductible amounts.......... . 50,000

Originating difference in 2020 which will

result in future deductible amounts.......................................... $ 45,000

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 Taxable income for 2020 $105,000

Originating difference in 2020, giving raise to future taxable amounts 80,000

Originating difference in 2020, giving raise to deductible amounts (45,000)

Pretax financial income for 2020 $140,000

b.

Deferred tax liability at the end of 2020 (230,000 x 20%): $46,000

Deferred tax liability at the beginning of 2020: 30,000

Deferred tax expense (benefit) for 2020 16,000

Deferred tax asset at the end of 2020 (95,000 x 20%): 19,000

Deferred tax asset at the beginning of 2020: 10,000

Deferred tax expense (benefit) for 2020 (9,000)

Date Account Titles Debit Credit

2020 Income tax expense 28,000

Dec 31 Deferred tax assets 9,000

Deferred tax liability 16,000

Income tax payable 21,000

c.

DUCAN CORPORATION

Income Statement (partial)

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 For the year ended December 31, 2020

Income before income tax $140,000

Income tax expense

Current 21,000

Deferred 7,000 28,000

Net income $112,000

d. Effective tax rate for 2020 = Income tax expense / Pretax financial income

= 28,000 / 140,000 = 20%

E19.25:

a.

Date Account Titles Debit Credit

2020 Income Tax Expense 24,000

Income Tax Payable (120,000 x 20%) 24,000

2021 Deferred Tax Asset (150,000 x 20%) 30,000

Income Tax Expense (Loss carryforward) 30,000

Income Tax Expense (Allowance) (30,000 x 1/5) 6,000

Allowance to Reduce Deferred Tax Asset to 6,000

Expected Realizable Value

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2022 Income Tax Expense 36,000

Deferred Tax Asset 30,000

Income Tax Payable [(180,000 – 150,0000) x 0.2] 6,000

Allowance to Reduce Deferred Tax Asset to Expected 6,000

Realizable Value

Income Tax Expense (Allowance) 6,000

b.

Income Statement (Partial)

For the year ended December 31, 2021

Income (loss) before income taxes 150,000

Income tax expense

Deferred 24,000

Net loss 126,000

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