Problem1: Chumlee Company reported pretax accounting income of $140 million in 2015. Included in this income was an expense of $10 million attributable to a penalty paid to the SEC for using overly aggressive accounting policies in the past. The penalty will not be deductible for tax purposes. Also, included in income was $30 million of revenue associated a long-term contract. This revenue will not be reported on the tax return until 2016. The tax rate is 40% for all years.

Prepare the entry in 2015 to properly account for income tax expense, income tax payable, and any deferred items?

Problem 2: Glazier Co. sells all of its glassware on a consignment basis. The consignees receive reimbursement of expenses plus a sales commission of 10% of retail value. During the current year, Glazier shipped 11,800 units with a cost of $24 per unit and a retail value of $44 per unit to the Glass Retailers. Freight paid by Glazier on these shipments totaled $26,600. Glass reported that it sold 9,500 units and incurred expenses relating to the sold units, exclusive of commissions, in the amount of $19,200. Glass remitted cash for the units sold minus commissions and expenses.

Prepare all necessary journal entries for Glazier company to records these transactions.

Problem 3: Work boots construction company entered into contract on January 1, 2016 to construct a large warehouse facility for Hidelt, Inc. the project is expected to be completed by December 1 , 2017. The contract price is $20,000,000 and allows Work boots to collect progress payments. The following information is available:

2016 2017

Costs incurred during the year $7,000,000 $3,000,000

Estimated costs to complete $3,000,000 0

Progress billing for the year $10,000,000 $10,000,000

Cash received from Hidelt $8,000,000 $9,000,000

Instructions:

Make the necessary accounting entries for 2016 and 2017 assuming that Work Boots uses the percentage of completion method of accounting?

Make the necessary accounting entries for 2016 and 2017 assuming that Work Boots uses the completed contract method of accounting?

Problem 4: Gratis construction company entered into contract to build an above ground walkway for a local casino construction begin in 2015 and will be completed in 2016. The total contract price is $12 million. The following information is available:

2015 2016

Costs incurred during the year $7,000,000 $3,000,000

Estimated costs to complete $3,000,000 0

Instructions:

Make the entry to record revenue, construction expanse, and gross profit for 2016 assuming Gratis uses the percentage of completion method of accounting?

Make the entry to record revenue, construction expanse, and gross profit for 2016 assuming Gratis uses the completed contract method of accounting?

Problem 5: During 2015, Lalee Company reported a loss of $400 million for both accounting and tax purposes. Lalee has been subject to a 40% tax rate since 2001 and there is no charge in the enacted rate for the future. Lalee reported the following amounts of income in its tax returns in prior years:

2014 $100 million

2013 $120 million

2012 $130 million

Under the tax rules, Lalee elects to carryback losses to get refunds of taxes paid in earlier years. With respect to any loss carryforward, management determines that it is more likely than not that 50% of any carryforward will not be used because there will be insufficient taxable income

Part One Prepare the necessary accounting entries for 2015 related to the loss carryback and carryforward. Assume that Lalee generates accounting and taxable income of $500 million in 2016.

Part Two Prepare the necessary accounting entries in 2016 to account

Problem 6: Monroe company commences doing business on January 1, 2016. Its pretax accounting income for the year $400,000. An analysis of the accounting records reveals the following:

The company paid a penalty to the state of NEW YORK for failing to use the necessary antipollution devices on its factory. The penalty is of $30,000 was probably expensed for GAAP purposes, but will not be deductible for tax purposes.

Deprecation for GAAP purposes was computed using straight line and amounted to $50,000. For tax purposes, deprecation is $80,000 for tax purposes.

Pretax accounting income is $400,000 includes the penalty expense and straight line deprecation. The companys tax rate is 30%.

Based on the above information:

• Determine taxable income for 2016.

• Prepare the adjusting entry to record income tax expense, income tax payable, and any deferred tax items.

Problem 7: Tobac Company reported an operating loss of $132,000 for financial reporting and tax purposes in 2013. The enacted tax rate is 40% for 2013 and all future years. Assume the Tobac elects a loss carryback. Taxable income, tax rates, and taxes paid for the four preceding years are as follows:

taxable income tax rate taxes paid

2009 30,000 30% 9,000

2010 35,000 30% 10,500

2011 42,000 35% 14,700

2012 40,000 40% 16,000

Tobac concludes that is more likely than not that 50% of any loss carryforward will not be used in future years.

Required

• Prepare all the necessary journal entries relative to tax accounting matters for 2013.

• Prepare the income tax section of the income statement for 2013.

3- Assume that in 2014, Tobac has book and taxable income of $200,000. Prepare the necessary journal entries to account for taxes in 2014.

Problem 8 : Lammel windows company entered into a contract on February 1 2016 to manufacture and install windows to ajax company's new office building. Lammel installed windows that is manufactured as a free benefit to its customers. In other words, the contract price for the windows would be the same regardless of whether or not Lammel does the installation.

The contract price for the windows is $20,000,000. Ajax requests that Lammel installs the windows.

The contracts require Ajax to pay $15,000,000 on the day the windows are delivered and to pay the remining $5,000,000 the day that installation is completed. Even though Lammel does not make a separate charge for installing the windows, the fair value of the installation is $1,000,000.

Lammel delivers the windows on November 1,2016. Installation is completed on December 31,2016.

Required:

Prepare the necessary journal entries for Lammel for November 1 and December 31.

Problem 9: Wynn Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2013. The enacted tax rate is 40%. Taxable income, tax rates, and income taxes paid in Wynns first four years of operation were as follows:

Taxable income Tax rates Income taxes paid

2009 60,000 30% 18,000

2010 70,000 30% 21,000

2011 80,000 40% 32,000

2012 60,000 45% 27,000

Required

• Prepare the J/E to recognize income tax benefit to the operating loss. Wynn elects the carryback option.

• Show the lower portion of the 2013 income statement that reports the income tax benefit of the operating loss.

3- assume that wynn reports 80,000$ of income for both financial reporting and tax purposes in 2014. Record the appropriate entry for 2014 to accurately reflect wynns accounting for income taxes that year.

Problem 10: Windsor Windows manufactures and sells custom windows for commercial office buildings. Windsor also provides installation services for the windows. The installation process can be performed by other vendors if chosen by Windsors customers, but Windsor will do the installation at no additional charge for its customers who buy windows from Windsor. On September 1, 2015, Windsor enters into a contract to manufacture, deliver and install windows for a particular industrial customer. The total contract price is for $30 million. The contract provides that Windsor will be paid $15 million upon delivery of the windows and $15 million when the installation is complete. Windsor will do the installation at no additional charge, but the market value of the installation service on a contract this large is $1 million.

Windsor delivers the windows at the customers new office building on December 1, 2015. In accordance with the contract, Windsor is paid $15 million on the date. Installation of the windows does not begin until January 2, 2016 and installation is completed on January 31, 2016. Windsor is then paid an additional $15 million from the customer on that date.

Prepare the necessary accounting entries on December 1, 2015 and on January 31, 2016 to reflect this business transaction.

Problem 11: Zucca company generates a loss of 11,000,000 for accounting and tax purposes in 2016. Its record reveal the following:

Accounting and taxable income Tax paid

2013 $4,000,000 $1,600,000

2014 $6,000,000 $2,400,000

2015 $2,000,000 $800,000

The tax rate for all the year is 40%. Management believes that is more likely than not that any loss carryforward will have zero value because the company will have significant losses for years after 2016 as well.

Part A :

Prepare the necessary accounting entries for 2016 to account for income tax matters.

Assume that despite its predictions in 2016, the company generates accounting and taxable income of $20,000,000 in 2017 and is able to use any loss carryforward that year.

Part B:

Prepare the necessary accounting entries for 2017 to account for income tax matters.

Problem 12: Franco Corporation ones Chester National Bank (CNB) on a 10-year. 15% note in the amount of $ 100,000, plus @30,000 accrued interest. Because of financial difficulty. Franco has been unable to make annual interest payment for the past 2 years and the note due is due today. Accordingly, CNB restructured Franco Corporations dept. as follows:

• the $30,000 of accrued interest was forgiven.
• Franco was given 3 more years to pay off the dept. at 8% interest payments are to be made annually at year-end.
• Prepare the entry that Franco needs to make to reflect this restricting of its dept.
• Explain how the Creditor. CBN, will account for this transaction. You need not make the entry.

Problem 13:

(CHAPTER 20) ___Elsevier company has a defined benefit pension plan

Projected benefit obligation (all in $ million)

Balance January 1 300

Service cost 75

Interest cost 20

Benefits paid to retires (15)

Balance December 31 380

Plan assets

Balance January 1 200

Actual return on plan assets 15

Contribution 30

Benefits paid (15)

Balance December 31 230

The expected return on plan assets if 8%. There was no other relevant data for the and there are no other items

In OCI at January 1,2015.

Required:

1. Determine Elsevier companys pension expense for 2015.

2. Prepare the adjusting entry to record the pension plan activity for 2015

Problem 14

At the end of the preceding year, world industries had a deferred tax asset of $17,500,000 attributable to its only temporary difference of $50,000,000 for estimated warranty expenses. At the end of the current year, the temporary difference is $45,000,000. At the beginning of the year there was no valuation allowance for the deferred tax asset. At year end, world estimates that it is more likely than not that one third of the deferred tax asset will never be realized. Taxable income is$ 12,000,000 for the current year and the tax rate is 30% for all years.

Required:

Prepare journal entries for the current year dealing with matters related to the accounting for income taxes, your must show all supporting computations to receive credit.