Deferred Taxes

Problem 1

Pug Corp, (an 80% owned subsidiary of J & J), reported the following taxable income for its three years of operations:

2013 $300,000 income

2014 $600,000 loss

2015 $800,000 income

Pug's tax rate is 40% for all years. As of December 31, 2014, Pug was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. What did Pub report as net income, after tax, for 2015?

Problem 4

Several years ago, Quahog Corp. purchased equipment for $20,000,000. Quahog uses straight-line depreciation for financial reporting and MACRS for tax purposes. At December 31, 2010, the carrying value of the equipment was $18,000,000 and its tax basis was $15,000,000. At December 31, 2011, the carrying value of the equipment was $16,000,000 and the tax basis was $11,000,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,000,000. A tax rate of 35% applies to all years.

Required:

Prepare one journal entry to record Quahog's income tax expense for the current year. Show well-labeled computations for the income tax payable and the change in the deferred tax account.

Problem 6

In the current year, A Corporation collected rent of $3,600,000. For income tax reporting, the rent is taxed when collected. For financial reporting, the rent is recognized as income in the period earned. At the end of the current year the unearned portion of the rent collected in the current year amounted to $400,000. A Corporation had no temporary differences at the beginning of the current year. Assume an income tax rate of 30%.

Required:

The current year's income tax liability from the tax return is $800,000. Prepare the journal entry to record income taxes for the year. Show well-labeled computations.

Deferred Taxes Problem 1 Pug Corp, (an 80% owned subsidiary of J & J), reported the following taxable income for its three years of operations: 2013 $300,000 income 2014 $600,000 loss 2015 $800,000 income Pug's tax rate is 40% for all years. As of December 31, 2014, Pug was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. What did Pub report as net income, after tax, for 2015? Problem 4 Several years ago, Quahog Corp. purchased equipment for $20,000,000. Quahog uses straightline depreciation for financial reporting and MACRS for tax purposes. At December 31, 2010, the carrying value of the equipment was $18,000,000 and its tax basis was $15,000,000. At December 31, 2011, the carrying value of the equipment was $16,000,000 and the tax basis was $11,000,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,000,000. A tax rate of 35% applies to all years. Required: Prepare one journal entry to record Quahog's income tax expense for the current year. Show well-labeled computations for the income tax payable and the change in the deferred tax account. Problem 6 In the current year, A Corporation collected rent of $3,600,000. For income tax reporting, the rent is taxed when collected. For financial reporting, the rent is recognized as income in the period earned. At the end of the current year the unearned portion of the rent collected in the current year amounted to $400,000. A Corporation had no temporary differences at the beginning of the current year. Assume an income tax rate of 30%. Required: The current year's income tax liability from the tax return is $800,000. Prepare the journal entry to record income taxes for the year. Show well-labeled computations