In 2016, Waverly Corp. had pretax financial income of $66,000. This income included the following Life Insurance Premiums expense related to the company's coverage of the CEO Waverly is the beneficiary of the policy. The 2016 premiums were $15,000 Depletion taken in excess of depletion for financial reporting purposes of $10,000 MACRS depreciation of $40,000 Depreciation taken in the financial statements of $48,000 Estimated product warranty expense recorded in the financial statements of $27,000 Actual warranty costs paid of $20,000 Excess of accrual based sales over cash based sales of $11,000 Interest revenue on investments in municipal bonds of $25,000 1. 2. 3. 4. 5. 6. 7. 8. The future taxable and deductible amounts at the end of 2016 for the temporary differences are: Future Taxable Amounts Depreciation Difference Accrual-basis vs cash-basis excess $33,800 (DTL) $26,700 (DTL) Future Deductible Amounts Warranties $56,500 (DTA) At the beginning of 2016, Waverly had a deferred tax liability of $12,540 related to depreciation differences and $4,710 related to cash versus accrual sales. Waverly also had a deferred tax asset at the beginning of 2016 of $14,580 related to the warranty difference. The current and future tax rates is 30% REQUIRED Prepare a schedule to find Waverly's Taxable Income Prepare the tax journal entry for Waverly for 2016 what would be different if Waverly expected to only be able to realize 40% of any Deferred Tax Assets? 1. 2. 3, In 2016, Waverly Corp. had pretax financial income of $66,000. This income included the following Life Insurance Premiums expense related to the company's coverage of the CEO Waverly is the beneficiary of the policy. The 2016 premiums were $15,000 Depletion taken in excess of depletion for financial reporting purposes of $10,000 MACRS depreciation of $40,000 Depreciation taken in the financial statements of $48,000 Estimated product warranty expense recorded in the financial statements of $27,000 Actual warranty costs paid of $20,000 Excess of accrual based sales over cash based sales of $11,000 Interest revenue on investments in municipal bonds of $25,000 1. 2. 3. 4. 5. 6. 7. 8. The future taxable and deductible amounts at the end of 2016 for the temporary differences are: Future Taxable Amounts Depreciation Difference Accrual-basis vs cash-basis excess $33,800 (DTL) $26,700 (DTL) Future Deductible Amounts Warranties $56,500 (DTA) At the beginning of 2016, Waverly had a deferred tax liability of $12,540 related to depreciation differences and $4,710 related to cash versus accrual sales. Waverly also had a deferred tax asset at the beginning of 2016 of $14,580 related to the warranty difference. The current and future tax rates is 30% REQUIRED Prepare a schedule to find Waverly's Taxable Income Prepare the tax journal entry for Waverly for 2016 what would be different if Waverly expected to only be able to realize 40% of any Deferred Tax Assets? 1. 2. 3
