ACCT 557: Please help out with the answers attached.

Homework - Week 2 - Chapter 19 Problem 1: California Surplus Inc. qualifies to use the installment-sales method for tax purposes and sold an investment on an installment basis. The total gain of $75000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years; one-third of the sale price is collected in 2014 and the rest in 2015 and 2016. The tax rate was 35% in 2012, 30% in 2013, and 30% in 2014. The enacted tax rates of 2013 and 2014 are not known until 2013. The accounting and tax data are shown below. Financial Accounting Tax Return 2014 (35% tax rate) Income before temporary difference Temporary difference Income $ $ $ 175,000 75,000 250,000 $ $ $ 175,000 25,000 200,000 2015 (30% tax rate) Income before temporary difference Temporary difference Income $ $ $ 200,000 200,000 $ $ $ 200,000 25,000 225,000 2016 (30% tax rate) Income before temporary difference Temporary difference Income $ $ $ 180,000 180,000 $ $ $ 180,000 25,000 205,000 Required: 1 ) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable for 2014, 2015, and 2016. No deferred income taxes existed at the beginning of 2012. 2 ) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume Installment Accounts Receivable is classified as a current asset.) 3 ) Show the income tax expense section of the income statement for each year, beginning with \"Income before income taxes.\" Problem 1 Answers: 1) 2014 2015 2 Homework - Week 2 - Chapter 19 2) 3) Pretax financial income Taxable Income Temp Diff (reversing) Cumulative Temp Diff (Jan 1) Cumulative Temp Diff (Dec 31) Def Tax Liability 2014 Income Tax Expense Income Taxes Payable Deferred Tax Liability 2015 Income Tax Expense Deferred Tax Libility Income Taxes Payable 2016 Income Tax Expense Deferred tax Liability Income Taxes Payable 2014 Current Liabilities Deferred Tax Liability 2015 Current Liabilities Deferred Tax Liability 2016 There is no deferred tax liability to report 2014 Income before income taxes Income Tax Expense Current Deferred Net Income 2015 Income before income taxes Income Tax Expense Current Deferred Adjustment due to decreased tax rate Net Income $250,000 $200,000 $50,000 $$50,000 $17,500 $200,000 $225,000 -$25,000 $50,000 $25,000 $7,500 $87,500 $70,000 $17,500 $60,000 $7,500 $67,500 $54,000 $7,500 $61,500 $17,500 $7,500 $250,000 $70,000 $17,500 $87,500 $162,500 $200,000 $67,500 -$7,500 -$2,500 $57,500 $142,500 $180,0 $205,0 -$25, $25,0 Homework - Week 2 - Chapter 19 2016 Income before income taxes Income Tax Expense Current Deferred $180,000 $61,500 -$7,500 Net Income $54,000 $126,000 Homework - Week 2 - Chapter 19 Problem 2: Trenton Co. incurred a net operating loss of $850,000 in 2014. Combined income of 2012 and 2013 was $650,000. The tax rate for all years is 30%. Trenton elects the carry back option. Required: a. Prepare the journal entries to record the benefit of loss carry back and loss carry forward option. b. Assuming that it is more likely than not that the entire net operating loss carry forward will not be realized in future years, prepare all the journal entries necessary at the end of 2014. Problem 2 Answer 1) Operating Loss Benefit due to loss carryback 2) Operating Loss before Income Taxes Income Tax Benefit Benefit due to loss carryback $(850,000) $390,000 $(460,000) -$850,000 -$195,000 Homework - Week 2 - Chapter 19 Benefit due to loss carry forward Net Loss -$195,000 -$390,000 -$1,240,000 Homework - Week 2 - Chapter 19 Problem 1: California Surplus Inc. qualifies to use the installment-sales method for tax purposes and sold an investment on an installment basis. The total gain of $75000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years; one-third of the sale price is collected in 2014 and the rest in 2015 and 2016. The tax rate was 35% in 2012, 30% in 2013, and 30% in 2014. The enacted tax rates of 2013 and 2014 are not known until 2013. The accounting and tax data are shown below. Financial Accounting Tax Return 2014 (35% tax rate) Income before temporary difference Temporary difference Income $ $ $ 175,000 75,000 250,000 $ $ $ 175,000 25,000 200,000 2015 (30% tax rate) Income before temporary difference Temporary difference Income $ $ $ 200,000 200,000 $ $ $ 200,000 25,000 225,000 2016 (30% tax rate) Income before temporary difference Temporary difference Income $ $ $ 180,000 180,000 $ $ $ 180,000 25,000 205,000 Required: 1 ) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable for 2014, 2015, and 2016. No deferred income taxes existed at the beginning of 2012. 2 ) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume Installment Accounts Receivable is classified as a current asset.) 3 ) Show the income tax expense section of the income statement for each year, beginning with \"Income before income taxes.\" Homework - Week 2 - Chapter 19 Problem 2: Trenton Co. incurred a net operating loss of $850,000 in 2014. Combined income of 2012 and 2013 was $650,000. The tax rate for all years is 30%. Trenton elects the carry back option. Required: a. Prepare the journal entries to record the benefit of loss carry back and loss carry forward option. b. Assuming that it is more likely than not that the entire net operating loss carry forward will not be realized in future years, prepare all the journal entries necessary at the end of 2014