Eight independent situations are described below. Each involves future deductibl

Question

Eight independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by:

   

The Income Statement

The Tax Return

   

For each situation, determine taxable income assuming pretax accounting income is $290 million. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Eight independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by: ($ in millions) Temporary Differences Reported First on: The Income Statement The Tax Return Revenue Expense Revenue Expense 1. $39 2. $39 3. $39 4. $39 5. 34 39 6. 39 34 7. 34 39 29 8. 34 39 24 29 Required: For each situation, determine taxable income assuming pretax accounting income is $290 million. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

($ in millions) Temporary Differences Reported First on:

The Income Statement

The Tax Return

Revenue Expense   Revenue Expense 1. $39 2. $39 3. $39 4. $39 5. 34 39 6. 39 34 7. 34 39 29 8. 34 39 24 29

Explanation / Answer

Case 1 Pretax accounting income 290 Add : temporary difference of expenses booked in income statement not to be taken in tax return 39 Taxable income 329 Case 2 Pretax accounting income 290 Less : temporary difference of revenue booked in income statement not to be taken in tax return 39 Taxable income 251 Case 3 Pretax accounting income 290 Add : temporary income reflected in tax return for revenue 39 Taxable income 329 Case 4 Pretax accounting income 290 Less : Temporary difference of expenses reflected in tax return 39 Taxable income 251 Case 5 Pretax accounting income 290 Less : temporary difference of revenue booked in income statement 34 Add : temporary difference of expenses booked in income statement 39 Taxable income 295 Case 6 Pretax accounting income 290 Add : temporary difference of expenses booked in income statement 39 Add : temporary income reflected in tax return for revenue 34 Taxable income 363 Case 7 Pretax accounting income 290 Less : temporary difference of revenue booked in income statement 34 Add : temporary difference of expenses booked in income statement 39 Less : Temporary difference of expenses reflected in tax return 29 Taxable income 266 Case 8 Pretax accounting income 290 Less : temporary difference of revenue booked in income statement 34 Add : temporary difference of expenses booked in income statement 39 Less : Temporary difference of expenses reflected in tax return 29 Add : temporary income reflected in tax return for revenue 24 Taxable income 290

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