Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 2JC
To determine
If valuation allowance be recorded to offset deferred tax asset .
Given Information:
FD Inc. is designer and manufacturer of exclusive women’s wear. FD holds a record to report strong earnings. But the earnings of FD had declined in past few years. There are some buyers that appreciate the designs of FD Inc. despite the downfall;a large contract is finalized by the FD with one of its buyers. The management of FD decided to overhaul business to regain the concerns of buyers. A law suit is going on regarding te discrimination on FD, this law suit can cause huge payouts to FD. There is no book-tax dissimilarities in FD reports, as he incurred loss in current year and have had nominal income in past two years.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Below is a major portion of the income statements of
KTA Inc. for 2020 and 2021:
Sales
Cost of Sales
Gross Margin
2020
P80,000
50,000
P30,000
2021
P97,200
72,000
P25,200
The firm sold its sole product for P8/unit during 2020.
Even though the sales units increased by 20% during 2021,
the gross margin declined. Disappointed with the results,
the owner asked for your assistance in analyzing the cause
of the gross margin decline.
A. 1.25%
B. (1.25%)
Percentage increase (decrease) in sales price.
C. (2.125%)
D. 2.125%
17. Jollibee has just ended the calendar year making a sale in the amount of P200,000 of merchandise purchased during the year at a total cost of P150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face isA. low profitability.B. insolvency.C. inability to receive credit.D. high leverage.
Below is a major portion of the income statements of
KTA Inc. for 2020 and 2021:
Sales
Cost of Sales
Gross Margin
2020
P80,000
50,000
P30,000
2021
P97,200
72,000
P25,200
The firm sold its sole product for P8/unit during 2020.
Even though the sales units increased by 20% during 2021,
the gross margin declined. Disappointed with the results,
the owner asked for your assistance in analyzing the cause
of the gross margin decline.
Increase (decrease) in gross margin due to change in sales price.
A. P1,000
C. P17,200
B. P1,200
D. (P4,800)
Chapter 17 Solutions
Intermediate Accounting
Ch. 17 - Prob. 17.1QCh. 17 - When will income tax expense and income taxes...Ch. 17 - Will permanent differences cause the effective tax...Ch. 17 - When do permanent differences arise?Ch. 17 - How are deferred tax assets and deferred tax...Ch. 17 - Prob. 17.6QCh. 17 - Prob. 17.7QCh. 17 - Prob. 17.8QCh. 17 - Prob. 17.9QCh. 17 - How does a firm determine the need for a valuation...
Ch. 17 - Prob. 17.11QCh. 17 - Prob. 17.12QCh. 17 - Prob. 17.13QCh. 17 - How does an entity account for uncertain tax...Ch. 17 - Prob. 17.15QCh. 17 - Prob. 17.16QCh. 17 - Do U.S. GAAP and IFRS classify deferred tax...Ch. 17 - Prob. 17.18QCh. 17 - Cavan Company prepared the following...Ch. 17 - Prob. 17.2MCCh. 17 - Prob. 17.3MCCh. 17 - Prob. 17.4MCCh. 17 - Prob. 17.5MCCh. 17 - Prob. 17.6MCCh. 17 - Prob. 17.7MCCh. 17 - Prob. 17.1BECh. 17 - Income Taxes Payable. Limmox Company has...Ch. 17 - Permanent Differences. Simmox Company's income...Ch. 17 - Permanent Differences. Plimmox Company's income...Ch. 17 - Permanent Differences, Reconciliation of Statutory...Ch. 17 - Prob. 17.6BECh. 17 - Prob. 17.7BECh. 17 - Prob. 17.8BECh. 17 - Prob. 17.9BECh. 17 - Prob. 17.10BECh. 17 - Temporary Differences, Deferred Tax Liability....Ch. 17 - Temporary Differences. Deferred Tax Asset....Ch. 17 - Temporary Differences, Deferred Tax Asset. Using...Ch. 17 - Prob. 17.14BECh. 17 - Realizability of Deferred Assets. Maves, Inc....Ch. 17 - Prob. 17.16BECh. 17 - Prob. 17.17BECh. 17 - Prob. 17.18BECh. 17 - Prob. 17.19BECh. 17 - Prob. 17.20BECh. 17 - Prob. 17.21BECh. 17 - Prob. 17.22BECh. 17 - Prob. 17.23BECh. 17 - Prob. 17.24BECh. 17 - Prob. 17.25BECh. 17 - Prob. 17.26BECh. 17 - Prob. 17.27BECh. 17 - Prob. 17.1ECh. 17 - Prob. 17.2ECh. 17 - Prob. 17.3ECh. 17 - Prob. 17.4ECh. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Temporary Differences, Deferred Tax Assets and...Ch. 17 - Prob. 17.7ECh. 17 - Prob. 17.8ECh. 17 - Change in Tax Rates, Permanent Difference,...Ch. 17 - Prob. 17.10ECh. 17 - Prob. 17.11ECh. 17 - Net Operating Loss, Carryback. Phlash Photo Labs,...Ch. 17 - Net Operating Loss, Carryforward. Loggins Lumber...Ch. 17 - Prob. 17.14ECh. 17 - Prob. 17.15ECh. 17 - Net Operating Loss, Carryforward, Tax Rate Change....Ch. 17 - Prob. 17.17ECh. 17 - Prob. 17.18ECh. 17 - Uncertain Tax Positions. Lewis Eagle Corporation...Ch. 17 - Uncertain Tax Positions. Based on the information...Ch. 17 - Prob. 17.21ECh. 17 - Prob. 17.1PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.3PCh. 17 - Prob. 17.4PCh. 17 - Temporary Differences, Deferred Tax Liabilities,...Ch. 17 - Prob. 17.6PCh. 17 - Prob. 17.7PCh. 17 - Prob. 17.8PCh. 17 - Prob. 17.9PCh. 17 - Prob. 17.10PCh. 17 - Prob. 17.11PCh. 17 - Prob. 17.12PCh. 17 - Permanent Differences, Temporary Tax Differences,...Ch. 17 - Prob. 1JCCh. 17 - Prob. 2JCCh. 17 - Prob. 1FSACCh. 17 - Prob. 1SSCCh. 17 - Prob. 2SSCCh. 17 - Prob. 3SSCCh. 17 - Scene 1: The concept of the deferred tax liability...Ch. 17 - Basis for Conclusions Case 2: Uncertain Tax...
Knowledge Booster
Similar questions
- Below is a major portion of the income statements of KTA Inc. for 2020 and 2021: Sales Cost of Sales Gross Margin 2020 P80,000 50,000 P30,000 2021 P97,200 72,000 P25,200 The firm sold its sole product for P8/unit during 2020. Even though the sales units increased by 20% during 2021, the gross margin declined. Disappointed with the results, the owner asked for your assistance in analyzing the cause of the gross margin decline. Increase (decrease) in gross margin due to change in units sold. A. (P4,800) D. P16,000 B. P6,000 D. P26,000arrow_forwardGrant Company has had a record-breaking year in termsof growth in sales and profitability. However, marketresearch indicates that it will experience operating lossesin two of its major businesses next year. The controllerhas proposed that the company record a provision forthese future losses this year, since it can afford to take thecharge and still show good results. Advise the controlleron the appropriateness of this charge.arrow_forwardMerchant Inc. has historically used FIFO. In year 4( beginning of the year) the company decided to switch to LIFO. The change caused net income in year 4 to be $ 86 million. If the company had used LIFO in year 3 the cost of goods sold would have been higher by $10 million that year. The company did not keep accurate and professional records for the first two years of its existence. Last year the company reported the following net income in its comparative income statements. $ millions year 1 year 2 year3 net income $ 110 101 98 prepare the journal entry at the beginning year 4 to record the change in accounting principle. Are changes in accounting principle applied prospectively or retrospectively? What amounts will the company report for the net income in its year 2 to 4 comparative income statements?arrow_forward
- PK, started a business in the mid-1990s. Operations started slowly and losses were incurred in the first five years, but a profit was realized in 2000. Selected financial statements for 1999 and 2000 are shown in Exhibits 1 and 2. Exhibit 1STATEMENT OF EARNINGSFor the year ending December 31, 2000Net Sales $ 4,516,000Cost of Goods Sold 3,368,000Gross Profit $ 1,148,000 Operating ExpensesSelling & Administration 737,000Depreciation 93,000Interest 215,000 $ 1,045,000 Net Income $ 103,000 Exhibit 2STATEMENT OF FINANCIAL POSITIONFor the years ending December 31 2000 1999AssetsCurrent Assets:Cash $…arrow_forwardAvatar Corp. has been the wholesale distributor of auto parts for domestic cars for 20 years. The company has suffered through the recent slump in the domestic auto industry, and its performance has not rebounded to the levels of the industry as a whole. The income statement for the year ended November 30, 2019 is also as follows (in thousands): Avatar Corp. Income Statement For the year ended, November 30, 2019 Net Sales 8,400 Cost and Expenses Cost of good sold 6,300 Marketing expenses 780 Administrative expense 900 Interest Expense 140 Total Expenses 8,120 Income before tax 280 Provision for income tax 112 Net income 168 The management team is considering the following actions for fiscal year 2020, which they expect, will improve profitability and result in a 5% increase in unit sales. a. Increase sales price 10% b. Increase…arrow_forwardSara is trying to analyze Henley Company finances but realizes that she was missing the company's net profits after taxes for the current year. Find the company's net profits after tax.ROA = 2.5%Total asset turnover = 0.5COGS = $105,000Gross profit margin = 0.30arrow_forward
- Three years ago, Linda Williams and her brother-in-law Robert Jones opened Marin Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2022 were disappointing. MARIN DEPARTMENT STOREIncome StatementFor the Year Ended December 31, 2022 Net sales $730,000 Cost of goods sold 584,000 Gross profit 146,000 Operating expenses Selling expenses $103,750 Administrative expenses 20,750 124,500 Net income $21,500 Linda believes the problem lies in the relatively low gross profit rate of 20%. Robert believes the problem is that operating expenses are too high. Linda thinks the gross profit rate can be improved by making two changes. (1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%. (2) Buy merchandise in larger…arrow_forwardThree years ago, Linda Williams and her brother-in-law Robert Jones opened Marin Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2022 were disappointing. MARIN DEPARTMENT STOREIncome StatementFor the Year Ended December 31, 2022 Net sales $730,000 Cost of goods sold 584,000 Gross profit 146,000 Operating expenses Selling expenses $103,750 Administrative expenses 20,750 124,500 Net income $21,500 Linda believes the problem lies in the relatively low gross profit rate of 20%. Robert believes the problem is that operating expenses are too high. Linda thinks the gross profit rate can be improved by making two changes. (1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%. (2) Buy merchandise in larger…arrow_forwardFor 20Y2, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement: Macklin Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Υ2 20Y1 Sales $483,672 $408,000 Cost of goods sold (358,800) (260,000) Gross profit $124,872 $148,000 Selling expenses $(50,150) $(34,000) Administrative expenses (29,520) (22,000) Total operating expenses $(79,670) $(56,000) Operating income $45,202 $92,000 Other revenue 2,166 1,700 Income before income tax expense $47,368 $93,700 Income tax expense (13,300) (28,100) Net income $34,068 $65,600 Required:arrow_forward
- Three years ago, Linda Williams and her brother-in-law Robert Jones opened Marin Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2022 were disappointing. MARIN DEPARTMENT STOREIncome StatementFor the Year Ended December 31, 2022 Net sales $730,000 Cost of goods sold 584,000 Gross profit 146,000 Operating expenses Selling expenses $103,750 Administrative expenses 20,750 124,500 Net income $21,500 Linda believes the problem lies in the relatively low gross profit rate of 20%. Robert believes the problem is that operating expenses are too high. Linda thinks the gross profit rate can be improved by making two changes. (1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%. (2) Buy merchandise in larger…arrow_forwardIn an effort to analyze Clockwork Company finances, Jim realized that he was missing the company's net profits after taxes for the current year. Find the company's net profits after taxes using the following information Return on equity = 10.5% Debt ratio = 35% Total Asset Turnover = 2 Cost of Goods Sold = R110,000 Gross Profit Margin = 0.35 Sales = 161538.46arrow_forwardFor 20Y2, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement: Macklin Inc.Comparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $652,230 $560,000 Cost of goods sold (469,000) (350,000) Gross profit $183,230 $210,000 Selling expenses $(66,980) $(47,000) Administrative expenses (39,180) (30,000) Total operating expenses $(106,160) $(77,000) Operating income $77,070 $133,000 Other revenue 3,046 2,400 Income before income tax expense $80,116 $135,400 Income tax expense (22,400) (40,600) Net income $57,716 $94,800 Required: 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Use the minus sign to indicate a decrease in the "Increase/(Decrease)" columns. If required, round percentages…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education