The pre-tax income statements for Moonstone Ltd. for two years (summarized) were as follows: 20X8 20X9 Revenues 266,000 $ 330,000 Expenses 181,000 237,000 Pre-tax income s 85,000 $ 93,000 For tax purposes, the following income tax differences existed: a. Revenues on the 20X9 statement of profit and loss include $37,000 rent, which is taxable in 20X8 but was unearned at the end of 20X8 for accounting purposes. b. Expenses on the 20X9 statement of profit and loss include political contributions of $12,500, which are not deductible for income tax purposes. c. Expenses on the 20X8 statement of profit and loss include $20,900 of estimated warranty costs, which are not deductible for income tax purposes until 20X9. Required: 1. What was the accounting carrying value and tax basis for unearned revenue and the warranty liability at the end of 20X8 and 20X9? 2. Compute (a) income tax payable, (b) deferred income tax, and (c) income tax expense for each period. Assume a tax rate of 30%. (Amounts to be deducted should be indicated by a minus sign.) 3. Give the entry to record income taxes for each period. 4. Complete statements of profit and loss to include income taxes expense. 5. What amount of deferred income tax will be reported on the statement of financial position at each year-end?
The pre-tax income statements for Moonstone Ltd. for two years (summarized) were as follows: 20X8 20X9 Revenues 266,000 $ 330,000 Expenses 181,000 237,000 Pre-tax income s 85,000 $ 93,000 For tax purposes, the following income tax differences existed: a. Revenues on the 20X9 statement of profit and loss include $37,000 rent, which is taxable in 20X8 but was unearned at the end of 20X8 for accounting purposes. b. Expenses on the 20X9 statement of profit and loss include political contributions of $12,500, which are not deductible for income tax purposes. c. Expenses on the 20X8 statement of profit and loss include $20,900 of estimated warranty costs, which are not deductible for income tax purposes until 20X9. Required: 1. What was the accounting carrying value and tax basis for unearned revenue and the warranty liability at the end of 20X8 and 20X9? 2. Compute (a) income tax payable, (b) deferred income tax, and (c) income tax expense for each period. Assume a tax rate of 30%. (Amounts to be deducted should be indicated by a minus sign.) 3. Give the entry to record income taxes for each period. 4. Complete statements of profit and loss to include income taxes expense. 5. What amount of deferred income tax will be reported on the statement of financial position at each year-end?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 4BCRQ
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Transcribed Image Text:The pre-tax income statements for Moonstone Ltd. for two years (summarized) were as follows:
20X8 20X9
Revenues
266,000
S 330,000
Expenses
181,000
237,000
Pre-tax income s
85,000
$ 93,000
For tax purposes, the following income tax differences existed:
a. Revenues on the 20X9 statement of profit and loss include $37,000 rent, which is taxable in 20X8 but
was unearned at the end of 20X8 for accounting purposes.
b. Expenses on the 20X9 statement of profit and loss include political contributions of $12,500, which are
not deductible for income tax purposes.
c. Expenses on the 20X8 statement of profit and loss include $20,900 of estimated warranty costs, which
are not deductible for income tax purposes until 20X9.
Required:
1. What was the accounting carrying value and tax basis for unearned revenue and the warranty
liability at the end of 20X8 and 2OX9?
2. Compute (a) income tax payable, (b) deferred income tax, and (c) income tax expense for each
period. Assume a tax rate of 30%. (Amounts to be deducted should be indicated by a minus sign.)
3. Give the entry to record income taxes for each period.
4. Complete statements of profit and loss to include income taxes expense.
5. What amount of deferred income tax will be reported on the statement of financial position at
each year-end?
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