Question
Comprehensive At the beginning of 2013, Norris Company had a deferred liability of $7,500, because of the use of MACRS depreciation for income tax purposes
Comprehensive
At the beginning of 2013, Norris Company had a deferred liability of $7,500, because of the use of MACRS depreciation for income tax purposes and units of production depreciation for financial reporting. The income tax rate is 30% for 2012 and 2013 but for 2012Congress enacted a 40% tax rate for 2014 and future years.
Norris's accounting records show the following pretax items of financial income for 2013: Income from the continuing operations, $136,000 (revenues of $311,000 and expenses of $174,500); gain on disposal of Division F, $24,900; extraordinary loss, $18,300; loss from operations of discontinued Division F, $8,100; and prior period adjustment, $13,200, due to an error that understated revenues in 2012. All of these items are taxable; however, financial depreciation for 2013 on assets related to continuing operations exceed tax depreciation by $5,000. Norris had a retained earning balance of $142,000 on January 1, 2013, and declared and paid cash dividends of $44,000 during 2013.
1. Prepare Norris's income tax journal entry at the end of 2013.
If an amount box does not require, leave it blank.
Dec 31 Income Tax Expense
Gain on Disposal of Division F
Retained Earnings
Deferred Tax Liability
Extraordinary Loss
Loss from Operation of Discourse
Income Tax payable
2. Prepare Norris's 2013 income statement.
Norris Company
Income Statement
For year Ended December 31,2013
Revenues
Expenses
Pretax income from continuing
Income tax expense
Income from continuing operation
Results from discontinued operations:
Less: Loss from operation discourse
Add: Gain on disposal of discourse
Income before extraordinary
Less: Extraordinary loss(net o
Net income
3. Prepare Norris's 2013 statement of retained earnings.
Norris Company
Statement of Retained earnings
for year Ended December 31, 2013
Retained earnings, January 1, 2013
Add: Prior period adjustment
Adjusted retained earnings, January 1,2013
Add: Net income
Less: cash dividends
retained earnings, December 31,2013
4. Show the related income tax disclosures on Norris's December 31, 2013, balance sheet.
Norris Company
partial balance sheet
December 31, 2013
current Liabilities
Income taxes payable
Noncurrent Liabilities
deferred income taxes
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