. $000s 2xx1 2xx2 2xx3 Effective tax rate 40% GAAP Income before tax 625 650 565
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Question
. $000s 2xx1 2xx2 2xx3 Effective tax rate 40% GAAP Income before tax 625 650 565 A $110 Warranty expense recorded & provision provided in 2xx1 but paid out 40% in 2xx2 & 60% in 2xx3 B Earned $35 interest on tax free municipal bonds in 2xx1, included in GAAP income C Provision for bad debts made in 2xx1 of $55, realized $40 of that in 2xx2 and $15 in 2xx3; no other provisions D Received $160 for subscription n 2xx0; 25% recorded as GAAP income in 2xx0, balance is GAAP income in 2xx1 E only depreciation expense for GAAP resulted from straight line $400 asset PURCHASED with $80 residual 4yr.life This asset was a MACRS 3yr. Asset for tax purpose; for GAAP into service for 4 of 12 months of 2xx1 consider no other depreciable assets F NOL carryforward is $260 at YE 2xx0 G Beginning Deferred tax asset/liability for 2xx1= $260 * 40% = $104 resulting from NOL PLUS add from D. Subscription above 1 Compute YE 2xx0 Deferred tax asset or liability [NET] 2 GAAP tax expense Compute for 2xx1, 2xx2, 2xx3 each year or YE as appropriate 3 IRS tax payable 4 The YE deferred tax asset or liability [NET] . $000s 2xx1 2xx2 2xx3 Effective tax rate 40% GAAP Income before tax 625 650 565 A $110 Warranty expense recorded & provision provided in 2xx1 but paid out 40% in 2xx2 & 60% in 2xx3 B Earned $35 interest on tax free municipal bonds in 2xx1, included in GAAP income C Provision for bad debts made in 2xx1 of $55, realized $40 of that in 2xx2 and $15 in 2xx3; no other provisions D Received $160 for subscription n 2xx0; 25% recorded as GAAP income in 2xx0, balance is GAAP income in 2xx1 E only depreciation expense for GAAP resulted from straight line $400 asset PURCHASED with $80 residual 4yr.life This asset was a MACRS 3yr. Asset for tax purpose; for GAAP into service for 4 of 12 months of 2xx1 consider no other depreciable assets F NOL carryforward is $260 at YE 2xx0 G Beginning Deferred tax asset/liability for 2xx1= $260 * 40% = $104 resulting from NOL PLUS add from D. Subscription above 1 Compute YE 2xx0 Deferred tax asset or liability [NET] 2 GAAP tax expense Compute for 2xx1, 2xx2, 2xx3 each year or YE as appropriate 3 IRS tax payable 4 The YE deferred tax asset or liability [NET]Explanation / Answer
Explanation
Beginning Balancce for year 2xx0 = $40(interest on tax free municipal bonds)+ $16((160*25%)-$104) = $56
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2xx1 2xx2 2xx3 GAAP income 625 650 565 warranty expenses 110 -44 -66 Bad debts provision and reversal 55 -40 -15 GAAP depreciation 80 80 80 Tax depreciation -133.333 -177.8 -59.24 Loss Adjustment -260 Subscription income -120 Tax Profit 356.6667 468.2 504.76 IRS Tax 142.6667 187.28 201.904 GAAP Tax 236 260 226 Deferred Tax Asset for the Period 93.33333 72.72 24.096 Beginning Balance 56 149.3333 222.0533 Closing Balance 149.3333 222.0533 246.1493Related Questions
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