Question
The following information relates to Perdue Corporation , which began operations on 1/1/ YR10. 1) The 12/31/YR 10 balance sheet reflects an Unearned Revenue Account
The following information relates to Perdue Corporation , which began operations on 1/1/ YR10.
1) The 12/31/YR 10 balance sheet reflects an Unearned Revenue Account of $ 8,000. This account will be settled in YR11 and YR12 in equal amounts of $4,000 in each year
2) Prepaid Insurance on 12/31/YR10 is $ 45,000. This insurance coverage will be used equally in YR11, YR12 and YR13.
3) The 12 /31/YR 10 Accounts Payable balance is $ 60,000. The firm plans on paying this balance equally in YR11 and YR12
4) The 12/31/YR10 Receivable account of $ 40,000 will be collected in equal amounts during YR11,YR12,YR13 and YR14.
5) Purdue purchased an asset for $150,000 on 1/ 1/YR10 . Temporary differences stemming from this fixed asset will start reversing in YR13. The depreciation schedules for financial purposes and tax purposes are as follows:
YR10 YR11 YR12 YR13 YR14
Financial Depreciation 30,000 30,000 30,000 30,000 30,000
Tax Depreciation 50,000 40,000 30,000 20,000 10,000
Pretax Financial Income in YR10 100,000. Enacted tax rates are as follows: 30% in YR10,40% in YR11, and 50% in YR12 and beyond.
- Calculate Taxos Payable for YR10 by filling in the following table.
Accounts Add or Subtract? Amounts
Pretax Financial Income 100000
1) Unearned Revenues
2) Prepaid Insurance
3 ) A / P
4 ) A / R
5) Fixed Asset CV
Taxable income
Tax Rate
Taxes Payable
2.Create a Tax Table for YR10.
3.Make a journal entries for YR10. Using the account names: Tax Expense, Taxes Payable, DTLcurrent, DTLlongterm, DTAcurrent, DTAlongterm.
4.Assume that the government passes a law changing the enacted tax rate for YR12 and thereafter from 50% to 35% on Mar. 31, YR11. What journal entry does the firm need to prepare to recognize this change on this date? Using the account names from the list below: Tax Expense, Taxes Payable, DTLcurrent, DTLlongterm, DTAcurrent, DTAlongterm.
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