Question 1 - The pretax financial income (or loss) figures for Synergetics Company are as follows.
|
2008
|
$162,900
|
|
2009
|
264,200
|
|
2010
|
85,500
|
|
2011
|
(162,900)
|
|
2012
|
(389,400)
|
|
2013
|
121,800
|
|
2014
|
111,200
|
Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 40% tax rate for 2008 and 2009 and a 35% tax rate for the remaining years.
Prepare the journal entries for the years 2010 to 2014 to record income tax expense and the effects of the net operating loss carrybacks, and carryforwards, assuming Synergetics Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)
Question 2 - The following information is available for Remmers Corporation for 2012.
1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $138,000. This difference will reverse in equal amounts of $34,500 over the years 2013-2016.
2. Interest received on municipal bonds was $19,100.
3. Rent collected in advance on January 1, 2012, totaled $69,900 for a 3-year period. Of this amount, $46,600 was reported as unearned at December 31, 2012, for book purposes.
4. The tax rates are 40% for 2012 and 35% for 2013 and subsequent years.
5. Income taxes of $327,300 are due per the tax return for 2012.
6. No deferred taxes existed at the beginning of 2012.
Compute taxable income for 2012.
Question 3 - The following information has been obtained for the Gocker Corporation.
1. Prior to 2012, taxable income and pretax financial income were identical.
2. Pretax financial income is $1,750,500 in 2012 and $1,424,100 in 2013.
3. On January 1, 2012, equipment costing $1,316,000 is purchased. It is to be depreciated on a straightline basis over 5 years for tax purposes and over 8 years for financial reporting purposes. (Hint: Use the half-year convention for tax purposes, as discussed in Appendix 11A.)
4. Interest of $67,200 was earned on tax-exempt municipal obligations in 2013.
5. Included in 2013 pretax financial income is an extraordinary gain of $200,200, which is fully taxable.
6. The tax rate is 38% for all periods.
7. Taxable income is expected in all future years.
Compute taxable income and income taxes payable for 2013.