Previous Page Next Page Page 9 of 10 Question 37 (30 points) Instructions: Answer each of the following questions by filling out the answer blanks below. There is one blank for each question. The answer for Question 1 goes in the first blank, for Question 2 in the second blank, and so on and so forth. Ensure that numerical responses are in comma format and are rounded to the nearest dollar. For example: 1; 50; 1,000; 150,000; 1,000,000; etc. Do not include symbols (i.e. $) or decimals in numerical answers. Other specific instructions might be present in the question, so make sure that you follow those as well if they are present. Failure to follow these instructions will result in answers being marked incorrect. While most answers will be numerical, some may be alphanumerical, meaning that you will include words and/or numbers. Remington Inc., reported pretax accounting income of $76 million for 2021. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $7 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023 b. Remington was assessed a penalty of $2 million by the EPA for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. c. Remington rents its operating facilities but owns one asset acquired in 2020 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions): Income Tax Return Statement Difference 2020 20,000,000 26,000,000 -6,000,000 2021 20,000,000 35,000,000 -15,000,000 2022 20,000,000 12,000,000 8,000,000 2023 20.000.000 2.000.000 13.000.000 80,000,000 80,000,000 0 is diadhahadan.connad Tiba Income Tax Return Difference Statement 2020 20,000,000 26,000,000 -6.000.000 2021 20,000,000 35,000,000 -15,000,000 2022 20,000,000 12,000,000 8,000,000 2023 20,000,000 7,000,000 13,000,000 80,000,000 80,000,000 0 d. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $2 million at the end of 2020. Warranty expense of $4 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021 and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries). e. In 2021, Remington accrued an expense and related liability for estimated paid future absences of $7 million relating to the company's new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million in 2022: $3 million in 2023). f. During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1 million and $2.5 million, respectively. The enacted tax rate is 25% each year. 1. What is net income for 2021? 2. What is the balance in the DTL at the end of 2021? 3. By what amount must the DTA account be adjusted in 2021? (Provide the numerical balance followed by the debit or credit indication. Example answer: 1,000 credit) 4. What is tax expense for 2021? 5. What amount will be reported on balance sheet related to temporary differences at December 31, 2021? (Provide the numerical balance followed by the DTA or DTL indication. Example answer: 1,000 DTA) Previous Page Next Page Page 9 of 10 Question 37 (30 points) Instructions: Answer each of the following questions by filling out the answer blanks below. There is one blank for each question. The answer for Question 1 goes in the first blank, for Question 2 in the second blank, and so on and so forth. Ensure that numerical responses are in comma format and are rounded to the nearest dollar. For example: 1; 50; 1,000; 150,000; 1,000,000; etc. Do not include symbols (i.e. $) or decimals in numerical answers. Other specific instructions might be present in the question, so make sure that you follow those as well if they are present. Failure to follow these instructions will result in answers being marked incorrect. While most answers will be numerical, some may be alphanumerical, meaning that you will include words and/or numbers. Remington Inc., reported pretax accounting income of $76 million for 2021. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $7 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023 b. Remington was assessed a penalty of $2 million by the EPA for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. c. Remington rents its operating facilities but owns one asset acquired in 2020 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions): Income Tax Return Statement Difference 2020 20,000,000 26,000,000 -6,000,000 2021 20,000,000 35,000,000 -15,000,000 2022 20,000,000 12,000,000 8,000,000 2023 20.000.000 2.000.000 13.000.000 80,000,000 80,000,000 0 is diadhahadan.connad Tiba Income Tax Return Difference Statement 2020 20,000,000 26,000,000 -6.000.000 2021 20,000,000 35,000,000 -15,000,000 2022 20,000,000 12,000,000 8,000,000 2023 20,000,000 7,000,000 13,000,000 80,000,000 80,000,000 0 d. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $2 million at the end of 2020. Warranty expense of $4 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021 and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries). e. In 2021, Remington accrued an expense and related liability for estimated paid future absences of $7 million relating to the company's new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million in 2022: $3 million in 2023). f. During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible. Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1 million and $2.5 million, respectively. The enacted tax rate is 25% each year. 1. What is net income for 2021? 2. What is the balance in the DTL at the end of 2021? 3. By what amount must the DTA account be adjusted in 2021? (Provide the numerical balance followed by the debit or credit indication. Example answer: 1,000 credit) 4. What is tax expense for 2021? 5. What amount will be reported on balance sheet related to temporary differences at December 31, 2021? (Provide the numerical balance followed by the DTA or DTL indication. Example answer: 1,000 DTA)