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cricket20 [7]
2 years ago
7

"Zurich Company reports pretax financial income of $70,000 for 2014. The following items cause taxable income to be different th

an pretax financial income. 1. Depreciation on the tax return is greater than depreciation on the income statement by $16,000. 2. Rent collected on the tax return is greater than rent earned on the income statement by $22,000. 3. Fines for pollution appear as an expense of $11,000 on the income statement. Zurich’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2014.Compute taxable income and income taxes payable for 2014."Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)Prepare the income tax expense section of the income statement for 2014, beginning with the line "Income before income taxes.".
Business
1 answer:
Ivan2 years ago
6 0

Answer:

Explanation:

Income tax expense: The expense account that reveals the amount of pre-determined tax paid on income for a required period of time is known as income tax expense account. The following formula can be used to determine the income tax expense:

Income tax expense = (Income before tax\times Income tax rate

Income statement: This is the financial statement of a company which reports all the revenues that are earned and expenses that are to be expended by the company on the immediate accounting year. Income statement is also known profit and loss statement.

Rules for debit and credit:

  • When asset increases, debit it and when asset decreases, credit it.

  • When liabilities increase, credit it and when liabilities decrease, debit it.

  • When stockholders’ equity increases, credit it and when stockholders’ equity decreases, debit it.

  • When the expenses and losses increase, debit them and when the expenses and losses decrease, credit it.

  • When incomes and gains increase, credit them and when incomes and gains decrease debit them.

Earnings before tax: It is the revenue of a company before adjustment of tax. It consists of all operating expenses. It is the earning retained by the company.

1.) To calculate the taxable income and income tax payable:

    Particulars                              Current year      Deferred asset     Deferred liability

Financial income                            $70,000

Excess tax collected                      $16,000                                           $16,000

Excess rent collected                    $22,000              -$22,000

Fines (permanent)                          $11,000

Taxable income(IRS)                     $87,000              -$22,000            $16,000

Tax rate                                           30%                      30%                     30%

Income tax                                     $26,100               -$6,600              $4,800

Therefore, the taxable income is $87,000, and the income tax is $26,100 for current year.        

The taxable income is calculated by adding the income earned, which are eligible for taxation. The financial income is $70,000, the excess tax depreciation is $16,000 (which should be deducted), and the excess rent collected is $22,000. The fines are $11,000. It is taxable as it is permanent. Thus, the taxable income is $87,000. The tax rate is 30 percent. The taxable income should be multiplied with the tax rate. Thus, the taxable income is $26,100. It is income tax payable.

2.) To Prepare a journal entry to record income tax expense, deferred income taxes, and income tax payable for 2014.

Date      Account titles and ex[planations      Debit           Credit

2014      Income tax expense                          $24,300

             Deferred tax asset                             $6,600

             Deferred tax liability                                                  $4,800

             Income tax payable                                                  $26,100

Therefore, income tax expense is debited with $24,300, deferred tax asset is debited with $6,600, deferred tax liability is credited with $4,800, and the income tax payable is credited with $26,100.

It is given that the income tax expense, deferred income taxes, and income taxes payable should be recorded. The income tax expense is $24,300, deferred tax asset is $6,600, deferred liability is $4,800, and the income tax payable is $26,100. The income tax payable is calculated by adding the income tax expense to the deferred tax asset and deducting the obtained value from the liability. Thus, $24,300 is added to $6,600 and deducted by $4,800 and $26,100. Therefore, the income tax expense is debited with $24,300, deferred tax asset is debited with $6,600, deferred tax liability is credited with $4,800, and the income tax payable is credited with $26,100.

3.) To Prepare the income tax expense section of the income statement for 2014.

                                      Income Statement

Particulars                                             Amount       Amount

Income before taxes                                                 $70,000

Income tax expenses current             $26,100

Income tax expenses deferred          -$1,800         $24,300

Net income(loss)                                                       $45,700

It is given that the income before taxes is $70,000, income tax expense of current year is $26,100, and for the deferred year is $1,800. The net income tax expense is $24,300. The net income is calculated by deducting the income before taxes from the income tax expenses. Thus, $24,300 is deducted from $70,000. Therefore, the net income is $45,700.

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Answer:

Foreign Direct Investment

Explanation:

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4 0
3 years ago
What is the value of zero-coupon bond with a par value of $1,000 and a yield to maturity of 5.20%? The bond has 12 years to matu
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Answer:

$544.265

Explanation:

Given:

FV = $1,000

Yield to maturity = 5.2%

N = 12 years

Required:

Find the value of the zero coupon bond.

Use the formula:

PV = FV * PVIF(I/Y, N)

Thus,

PV = 1000 * PVIF(5.2%, 12)

= 1000 * 0.544265

= $544.265

The value of the zero coupon bond is $544.3

7 0
3 years ago
Death benefit proceeds from a life insurance policy are included in a decedent's gross estate in which of the following circumst
Katarina [22]

Answer:

B. 1 and 2.

Explanation:

Life insurance policy can be defined as a contract between a policyholder and an insurer, in which the insurer agrees to pay an amount of money to a specific beneficiary either upon the death of the insured person (decedent) or after a set period of time.

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Generally, insurance companies across the globe charge millions of their customers (insured) premiums every year. This gives them the privilege of having a pool of cash which can be used to cover the cost of losses and destruction to the asset of a small fraction or percentage of its customers.

This simply means that, since insurance companies collect premium from all of their customers for losses which may or may not occur, so they can easily use this cash to compensate or indemnify for losses incurred by those having high risk.

Death benefit proceeds from a life insurance policy are included in a decedent's gross estate in the following circumstances:

I. The decedent gave the policy to his father four years ago, but retained the right to change the name of the beneficiary.

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8 0
2 years ago
Hache Corporation uses the weighted-average method in its process costing system. Data concerning the first processing departmen
Greeley [361]

Answer:

The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to: d) $21,797

Explanation:

Calculation of Equivalent Units of Production

<u>Materials </u>

Units transferred to the next department (5,800 × 100%) = 5,800

Units in ending Work In process (1,850 × 50%)                  =    925

Total Equivalent Units of Production for Materials             = 6,725

<u>Conversion</u>

Units transferred to the next department (5,800 × 100%)    = 5,800

Units in ending Work In process (1,850 × 20%)                     =    370

Total Equivalent Units of Production for Conversion Costs =  6,170

Calculation of Cost per Equivalent units of Production

Materials

Cost per equivalent unit = Total Material Cost ÷ Total Equivalent Units of Production for Materials

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                                        = $14.825

Cost per equivalent unit = Total Material Cost ÷ Total Equivalent Units of Production for Materials

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                                        = $21.848

Calculation of cost of ending work in process inventory

Materials ( 925 ×  $14.825)             =  $13,713.12

Conversion Cost ( 370 × $21.848)  =  $8,083.76

Total                                                 =  $21,796.88

Thus,

The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to: d) $21,797.

5 0
3 years ago
Laurel, Inc., and Hardy Corp. both have 6 percent coupon bonds outstanding, with semiannual interest payments, and both are curr
stealth61 [152]

Answer:

A. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?

Laurel, Inc. = -8.11%

Hardy Corp. = -18.91%

B. If interest rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of these bonds be then?

Laurel, Inc. = +8.98%

Hardy Corp. = +25.49%

Explanation:

bonds with 6% semiannual coupons, sold at par $1,000

Laurel, Inc. bond maturity in 5 years

Hardy Corp. bond maturity in 18 years

the current price of a bond is the sum of the present value of its face value and coupons. I will use an annuity table to calculate PV of face value and an ordinary annuity table for the coupons:

Laurel, Inc.

market rate 4% = ($1,000 x 0.8203) + ($30 x 8.9826) = $820.30 + $269.48 = $1,089.78, % change = 89.78/1,000 = 8.98%

market rate 8% = ($1,000 x 0.6756) + ($30 x 8.1109) = $675.60 + $243.33 = $918.93, % change = -81.07/1,000 = -8.11%

Hardy Corp.

market rate 4% = ($1,000 x 0.4902) + ($30 x 25.489) = $490.20 + $764.67 = $1,254.87, % change = 254.87/1,000 = 25.49%  

market rate 8% = ($1,000 x 0.2437) + ($30 x 18.908) = $243.70 + $567.24 = $810.94, % change = -189.06/1,000 = -18.91%  

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3 years ago
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