solve this assignment

FratBro23
Category:
Accounting
Price: $5 USD

Question description

A06 Intermediate Accounting II

Part A (40 points)

Colorado Company has provided you the following information.

Year  Taxable income  Income tax rate

2014  $390,000  35% 

2015  $320,000  37%

2016  $400,000  40%

2017  ($1,200,000)  40%

Colorado Company has decided to use the loss carryback and carryforward provision as a result of the year 2017 loss. The enacted tax rate remains at 40% after year 2017. Colorado Company has determined that a valuation allowance is not necessary.

Prepare the journal entry on December 31, 2017 to record the carryback and carryforward decision.

Part B (30 points)

The Matrix Company began operations as of the beginningof 2015. During  2015, Matrix reported GAAP (book) income before taxes of $789,500. For income tax purposes, depreciation expense was $150,000; for GAAP (book) purposes, depreciation expense was $74,000. Matrix accrued $900,000 of revenue for GAAP (book) purposes during 2015; $600,000 of the accrued revenue was taxable during 2015. Matrix earned interest of $79,800 from a municipal bond investment during 2015. Matrix’s marginal income tax rate is 40%. Matrix did not make any income tax payments during 2015.

a.  Determine Matrix’s taxable income for the year ended December 31, 2015.

b.  Prepare the 2015 year-end journal entry to record income tax expense.

Part C (30 points)

a.  For each of the items below, determine whether the items are temporary differences or permanent differences. Also, for each temporary difference, you are required to determine whether a deferred tax asset or deferred tax liability is created by the temporary difference described. Assume that each of the temporary differences described is an originating difference.

1.  Municipal bond interest

2.  Accrued warranty expense

3.  Sales revenues received in advance

4.  Prepaid insurance where the tax deduction in future years will be less than the book expense

5.  Tax depreciation expense exceeds GAAP (book) depreciation expense

6.  Accrued bad debt expense

7.  The dividends received deduction

8.  Installment sales revenue (recognized currently for GAAP, recognized for tax purposes when cash is collected in future years)

9.  Life insurance payments for executives for which the company is the beneficiary

10.  Fines paid for law violations

b.  Explain why temporary differences result in deferred tax assets or deferred tax liabilities while permanent differences do not, and describe the difference in the formation of deferred tax assets and deferred tax liabilities.


Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1824 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors