Deferred taxes calculated tax expense, taxes payable and deferred tax

Deferred taxes calculated tax expense

Week 1 — Individual Assignment: Deferred Taxes — Due Mon, Day 7

All the information you need to compete this assignment is included.

YOU MUST COMPLETE AND SUBMIT THE ATTACHED EXCELWORKSHEET AS YOUR ASSIGNMENT!

** Anything else will not be accepted for this assignment **

  • Do not significantly alter the formatting of the spreadsheet
  • Do not delete tabs or columns
  • Do not change column headers or descriptions
  • Do not alter column width, formatting, shading or colors
  • I have provided enough lines for entries (If you need to add rows then something is incorrect)
  • Use the tab called “Work” for calculations (optional – not graded)

Submit the worksheet as your completed assignment.

Assignment:

WA Smith & Company had the following results of operations for the years 2013 thru 2017.

Year  2013  2014  2015  2016  2017
Income before tax    720,000    800,000    690,000    730,000    720,000

The company uses the asset-liability method to account for deferred taxes. The below table summarizes the differences in accounting between GAAP and tax regulations. Assume that these are the only deferred tax items over the 5 year period and that the company has a 40% tax rate each year.

Item  2013  2014  2015  2016  2017  Total
Depreciation
Per books      10,000      10,000      10,000      10,000      10,000     50,000
Per tax return      50,000             –             –             –             –     50,000
Difference     (40,000)      10,000      10,000      10,000      10,000           –
Interest revenue from municipal bonds
Per books      10,000      10,000      10,000      10,000      10,000     50,000
Per tax return             –             –             –             –             –           –
Difference      10,000      10,000      10,000      10,000      10,000     50,000
Royalty revenue
Per books      25,000      25,000      25,000      25,000             –   100,000
Per tax return    100,000             –             –             –             –   100,000
Difference     (75,000)      25,000      25,000      25,000             –           –

SECTION 1 – Calculation of tax expense, taxable payable & deferred tax amounts

Deliverables:
1(a) Calculate income tax expense for each year

1(b) Calculate income tax payable for each year

1(c) Calculate current and non-current deferred tax amounts for each year

1(d) Prepare the entries to record income tax expense, income tax payable and deferred taxes for 2013 and 2014

SECTION 2 – Presentation in financial statements

Deliverables:
2(a) Complete the summary income statements for each year

2(b) Compete the deferred tax amounts on the balance sheet for each year

SECTION 3 – Valuation allowance

Before closing the books for 2013, the company determines $2,000 of the deferred tax asset related to depreciation will not be realized.

Deliverables:
3(a) Record the entry for the deferred tax valuation allowance

3(b) Complete the balance sheet presentation for the deferred tax asset and valuation allowance


This is the form that will be used to grade your assignment:

Criteria Possible Points
Section 1 – Calculation of tax expense, taxable payable & deferred tax amounts 55.0
Section 2 – Presentation in financial statements 15.0
Section 3 – Valuation allowance 10.0
CONTENT 80.0
Utilizes provided layout correctly 10.0
MECHANICS 10.0
TOTAL ASSIGNMENT 90.0

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