Taxes Payable And Deferred Tax Amounts
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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
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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
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