Question

please help me with those

3. (12) Nott Co. at the end of 2019, its first vear of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Non-deductible fines paid for excess pollution Extra depreciation taken for tax purposes Estimated warranty expense tax-deductible when paid Taxable income $ 950,000 50.000 (250,000) 100.000 $850.000 Assuming a tax rate of 30%, calculate and report the amount of income tax expense. including the current and deferred portions for 2019. 4. (11) Bloom Corporation had the following 2019 income statement. Sales $200,000 Cost of goods sold 120.000 Gross profit 80,000 Operating expenses (including depreciation of $25,000) 50,000 Net income $ 30,000 The following accounts increased during 2019: Accounts Receivable by $10,000; Inventory by $8,000; Accounts Payable by $12,000. Prepare the Cash Flow from Operating Activities section of Bloom's 2019 Statement of Cash Flows in good form using the indirect method.

Answer 1

Hello! Answering first question only as er answering guidelines. Please ask next question separately.

Answer 3.

Tax rate is given to be 30%. For identifying the adjustments which qualify to be recorded for deferred tax purposes, we will see whether they are permanent differences or temporary differences.

Non-deductible fines paid for excess pollution will never be allowed for tax purposes, therefore they are permanent difference, having no impact on deferred tax.

Extra depreciation for tax purpose is a temporary difference and will be taken for deferred tax purpose.

Estimated warranty expense tax deductible when paid is a temporary difference and will be taken for deferred tax purpose.

Below are the calculations for the tax expense:

AB 1 2 Item Amount DTL/(DTA) 3 Depreciation 250,000 75,000 4 Warranty expense 100,000 (30,000) 5 Net Deferred Tax Expense 45,000 6 7 8 Calculation of Income tax expense Amount 10 Taxable income 850,000 11 Current tax 255,000 12 Deferred Tax 45,000 13 Total Tax expense 300,000

1 2 Item 3 Depreciation 4 Warranty expense 5 Net Deferred Tax Expense Amount 250000 100000 DTL/ (DTA) =B3*30% =-B4* 30% =SUM(C3:04) Amount 8 Calculation of Income tax expense 9 10 Taxable income 11 Current tax 12 Deferred Tax 13 Total Tax expense 850000 =B10*30% =C5 =B11+B12

Explanation: Depreciation difference will give rise to deferred tax expense and warranty expense will give rise to deferred tax income. Net deferred tax amount is taken in the income statement.