Question

Advanced Accounting II Chapter 19- Income Taxes Problem 1. Garrison Designs, Inc., a corporation organized on January 1, 2008. reported the following incomes (losses) for the ten-year period, 2008-2017: Year Income (Loss) Income Tax Rate 2008 S 16,000 50% 2009 (40,000) 50% 2010 16,000 48% 2011 24,000 48% 2012 (32.000) 45% 2013 16,000 42% 2014 32,000 42% 2015 64,000 34% 2016 80,000 34% 2017 (16,000) 30% Instructions (1) Applying the carryback provisions in the tax law, compute the net amount of taxes paid (amounts paid less refunds) for the ten-year period ending December 31, 2017. (2) Make journal entries to record income tax expense for 2015, 2016, and 2017. (3) Make journal entries to record income tax expense for 2017, assuming that Garrison chooses NOT to apply loss carryback in 2017 in anticipation of higher tax rates in the future, and it is more likely than not that 40% of the loss carry.forward will not be realized, ed www wa Ciao pronto 2011 The Problem 2. The following differences between financial and taxable income were reported by Dider Corporation for the year (a) Excess of tax depreciation over book depreciation $10,000 (b) Interest revenue on municipal bonds 9,000 (©) Excess of estimated warranty expense over actual expenditures 54,000 (d) Rent of next year paid 12,000 (e) Fines paid 30,000 (1) Excess of income reported under percentage-of-completion accounting for financial reporting over completed-contract accounting used for tax reporting 45,000 (8) Interest on indebtedness incurred to purchase tax-exempt securities 3,000 (h) Unrealized losses on marketable securities recognized for financial reporting 18,000 Instructions (1) Assume that Dider Corporation had pretax accounting income before considering items (a) through (h) of $900.0XX) for the current year. Compute the taxable income for the current year. (2) Make journal entries to record income tax expense for the year assuming that the tax rate is 40% this year and 50% starting year. (5) Prepare the income tax expense section of the income statement, beginning with "Income before income taxes." (4) Indicate how deferred income taxes should be presented on the balance sheet. ... 200.000 for 2017 and $288,000 for 2018. In preparing the in... taradar A . mited

Answer 1

1. Following carryback and carry-forward provisions, below is the calculation

Year	Income (a)	Tax rate (b)	Tax (a*b)	Refund
2008	16000	50%	8000	8000
2009	-40000	50%
2010	16000	48%	7680	7680
2011	24000	48%	11520	11520
2012	-32000	45%
2013	16000	42%	6720	6720
2014	32000	42%	13440
2015	64000	34%	21760
2016	80000	34%	27200
2017	-16000	30%		19200
	Net Tax payable in 2017 -->			9280

$9280 has been arrived by adding the yellow color cells and subtracting the blue color cells.

2.

2015
Income tax expense	21760
To Income tax payable		21760
2016
Income tax expense	27200
To Income tax payable		27200
2017
Income tax refund receivable	19200
To Income tax expense		19200

3.

Being Deferred tax asset created for entire loss amount for 2017.

Deferred Tax Asset	4800
To Income tax expense (benefit)		4800
(16000$*30%)