Problem Three Deferred Income Taxes Problem Three- Deferred Income Taxes (continued): Note: The deferred income tax example we worked through in class using ggursenote #9 (pages 35 through 37) and the analyses using the income tax disclosure on pages 45 and 46 will be useful when completing parts (d) and (e) below Problems Three and Four draw from the attached financial statement excerpts for Sprouts Farmers Market, Inc. Attachments from Sprouts Farmers Market 2014 financial report (Form 10-K) are on pages 20 through 23 and include the following Balance Sheets d) Assume that the statutory tax rate of 35% was used to calculate deferred tax liabilities related to depreciation and amortization. Footnote 18 on Income Taxes Where necessary, you may assume that the marginal tax rate is equal to the statutory tax rate of 35% disclosed by Sprouts Farmers Market, Inc. in Note 18. )As of December 28, 2014, which system has recognized a larger expense over time relating to depreciation and amortization: tax or financial accounting? Required a) What is the amount of Sprouts Farmers Market's total income tax obligation to all governmental entities (that is, the amount of taxes due that would be reported on the company's tax returns) for the year ended December 28, 2014? i) What is the approximate dollar magnitude of this difference? ii)What would be the balance in "Properties and equipment, net" on the balance sheet at December 28, 2014 if tax depreciation methods had been used throughout the assets' lives instead of the reported methods? b) What entry was recorded by Sprouts Farmers Market to record its income tax provision for fiscal year 2014? c) Note 18 discloses that the effective income tax rate for Sprouts Farmers Market is 38.15% for the year ended December 28, 2014. Show the calculation of this income tax rate using only information in Sprout Farmers Market's income Problem Three Deferred Income Taxes Problem Three- Deferred Income Taxes (continued): Note: The deferred income tax example we worked through in class using ggursenote #9 (pages 35 through 37) and the analyses using the income tax disclosure on pages 45 and 46 will be useful when completing parts (d) and (e) below Problems Three and Four draw from the attached financial statement excerpts for Sprouts Farmers Market, Inc. Attachments from Sprouts Farmers Market 2014 financial report (Form 10-K) are on pages 20 through 23 and include the following Balance Sheets d) Assume that the statutory tax rate of 35% was used to calculate deferred tax liabilities related to depreciation and amortization. Footnote 18 on Income Taxes Where necessary, you may assume that the marginal tax rate is equal to the statutory tax rate of 35% disclosed by Sprouts Farmers Market, Inc. in Note 18. )As of December 28, 2014, which system has recognized a larger expense over time relating to depreciation and amortization: tax or financial accounting? Required a) What is the amount of Sprouts Farmers Market's total income tax obligation to all governmental entities (that is, the amount of taxes due that would be reported on the company's tax returns) for the year ended December 28, 2014? i) What is the approximate dollar magnitude of this difference? ii)What would be the balance in "Properties and equipment, net" on the balance sheet at December 28, 2014 if tax depreciation methods had been used throughout the assets' lives instead of the reported methods? b) What entry was recorded by Sprouts Farmers Market to record its income tax provision for fiscal year 2014? c) Note 18 discloses that the effective income tax rate for Sprouts Farmers Market is 38.15% for the year ended December 28, 2014. Show the calculation of this income tax rate using only information in Sprout Farmers Market's income
