Learning Objective 3: Account for income tax by a corporation) During 2012, the Martell Heights Corp. income statement reported income of $500,000 before tax. The company’s income tax return filed with the IRS showed taxable income of $440,000. During 2012, Martell Heights was subject to an income tax rate of 40%.
Requirements
1. Journalize Martell Heights’ income taxes for 2012.
2. How much income tax did Martell Heights have to pay for the year 2012?
3. At the beginning of 2012, Martell Heights’ balance of Deferred Tax Liability was $32,000. How much Deferred Tax Liability did Martell Heights report on its balance sheet at December 31, 2012?
E11-20A
(Learning Objective 4: Compute earnings per common share) Palace Loan Company’s balance sheet reports the following:
Preferred stock, $20 par value, 2%, 11,000 shares issued
$ 220,000
Common stock, $2.50 par, 1,100,000 shares issued
2,750,000
Treasury stock, common, 120,000 shares at cost
480,000
During 2012, Palace earned net income of $6,200,000. Compute Palace’s earnings per common share (EPS) for 2012. (Round EPS to two decimal places.)