Question 26

Pole Co. at the end of 2015, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income	$370,000
Extra depreciation taken for tax purposes	(990,000)
Estimated expenses deductible for taxes when paid	840,000
Taxable income	$220,000

Use of the depreciable assets will result in taxable amounts of $330,000 in each of the next three years. The estimated litigation expenses of $840,000 will be deductible in 2018 when settlement is expected.

Prepare a schedule of future taxable and deductible amounts. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2016	2017	2018	Total
Future taxable (deductible) amounts
Extra depreciation	$	$	$	$
Litigation

SHOW LIST OF ACCOUNTS

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Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2015, assuming a tax rate of 30% for all years. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

Question 27

In 2015, Fischer Corporation changed its method of inventory pricing from LIFO to FIFO. Net income computed on a LIFO as compared to a FIFO basis for the four years involved is: (Ignore income taxes.)

LIFO	FIFO
2012	$70,380	$77,130
2013	76,050	79,290
2014	78,300	82,260
2015	83,250	83,430

Indicate the net income that would be shown on comparative financial statements issued at 12/31/15 for each of the four years, assuming that the company changed to the FIFO method in 2015.

Net Income
2012	$
2013	$
2014	$
2015	$

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Assume that the company had switched from the average cost method to the FIFO method with net income on an average cost basis for the four years as follows: 2012, $80,400; 2013, $86,120; 2014, $90,300; and 2015, $93,600. Indicate the net income that would be shown on comparative financial statements issued at 12/31/15 for each of the four years under these conditions.

Net Income
2012	$
2013	$
2014	$
2015	$

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Assuming that the company switched from the FIFO to the LIFO method, what would be the net income reported on comparative financial statements issued at 12/31/15 for 2012, 2013, and 2014?

Net Income
2012	$
2013	$
2014	$