Brief Exercise 19 9shetland Inc Had Pretax Financial Income Of 1540 ✓ Solved

Brief Exercise 19-9 Shetland Inc. had pretax financial income of 4,000 in 2014. Included in the computation of that amount is insurance expense of ,000 which is not deductible for tax purposes. In addition, depreciation for tax purposes exceeds accounting depreciation by ,000. Prepare Shetland’s journal entry to record 2014 taxes, assuming a tax rate of 45%. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Click if you would like to Show Work for this question: Open Show Work Brief Exercise 19-7 At December 31, 2014, Hillyard Corporation has a deferred tax asset of 0,000.

After a careful review of all available evidence, it is determined that it is more likely than not that ,000 of this deferred tax asset will not be realized. Prepare the necessary journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Brief Exercise 19-2 Oxford Corporation began operations in 2014 and reported pretax financial income of 5,000 for the year. Oxford’s tax depreciation exceeded its book depreciation by ,000. Oxford’s tax rate for 2014 and years thereafter is 30%.

In its December 31, 2014, balance sheet, what amount of deferred tax liability should be reported? Deferred tax liability to be reported $ Brief Exercise 19-15 Youngman Corporation has temporary differences at December 31, 2014, that result in the following deferred taxes. Deferred tax liability—current ,000 Deferred tax asset—current $(62,000 ) Deferred tax liability—noncurrent ,000 Deferred tax asset—noncurrent $(27,000 ) Indicate how these balances would be presented in Youngman’s December 31, 2014, balance sheet. Youngman Corporation Balance Sheet December 31, 2014 $ $

Paper for above instructions

Assignment Solutions

This assignment provides solutions for different exercises regarding accounting principles for income taxes, emphasizing computation of tax liabilities, deferred tax assets, and liabilities as per accounting guidelines.

Brief Exercise 19-9

Journal Entry for Shetland Inc.
Shetland Inc. had a pretax financial income of 4,000, where certain adjustments must be made for tax purposes. First, adjustments for non-deductible expenses and temporary differences must be accounted for:
1. Insurance Expense (Non-Deductible):
- Non-deductible Insurance Expense: ,000
2. Depreciation Adjustment:
- Excess Depreciation for Tax Purposes: ,000 (this would reduce taxable income).

Calculation of Taxable Income:

Taxable Income = Pretax Financial Income - Non-Deductible Expenses + Excess Tax Depreciation
- Taxable Income = 4,000 - ,000 + ,000
- Taxable Income = 0,000

Tax Computation:

Tax Expense = Taxable Income × Tax Rate
- Tax Expense = 0,000 × 45% = ,000

Journal Entry:

The journal entry to record the tax liability for Shetland Inc. would be as follows:
| Account Titles and Explanation | Debit | Credit |
|--------------------------------|-------------|--------------|
| Income Tax Expense | ,000 | |
| Income Taxes Payable | | ,000 |
This entry reflects the company setting aside the tax obligation incurred during the year.

Brief Exercise 19-7

Journal Entry for Hillyard Corporation
At December 31, 2014, Hillyard Corporation has a deferred tax asset totaling 0,000. However, upon reviewing, it is determined that ,000 of that asset may not be realized.

Adjustment Needed:

To adjust the deferred tax asset to reflect the realizable amount, the following entry is required:

Journal Entry:

| Account Titles and Explanation | Debit | Credit |
|---------------------------------------|-------------|------------|
| Valuation Allowance on Deferred Tax Asset | ,000 | |
| Deferred Tax Asset | | ,000 |
This entry introduces a valuation allowance for the portion of the deferred tax asset that is unlikely to be realized.

Brief Exercise 19-2

Deferred Tax Liability Calculation
For Oxford Corporation, with the tax depreciation exceeding its book depreciation by ,000 and a corporate tax rate of 30%, we can compute the deferred tax liability.

Calculation:

Deferred Tax Liability = Temporary Difference × Tax Rate
- Deferred Tax Liability = ,000 × 30%
- Deferred Tax Liability = ,000
Thus, the deferred tax liability to be reported on its December 31, 2014 balance sheet is ,000.

Brief Exercise 19-15

Presentation of Deferred Tax Balances on Balance Sheet
For Youngman Corporation, we need to organize and present the deferred tax liabilities and assets on the balance sheet date.
The currently available deferred tax balances are:
1. Deferred Tax Liability - Current: ,000
2. Deferred Tax Asset - Current: $(62,000)
3. Deferred Tax Liability - Noncurrent: ,000
4. Deferred Tax Asset - Noncurrent: $(27,000)

Presentation Format:

The net value of deferred tax assets and liabilities should be clearly presented. First, we calculate the net current and noncurrent deferred taxes.
Current Net Deferred Tax:
- Current Net = Deferred Tax Liability (Current) - Deferred Tax Asset (Current)
- Current Net = ,000 - ,000 = $(24,000) (Net Deferred Tax Asset)
Noncurrent Net Deferred Tax:
- Noncurrent Net = Deferred Tax Liability (Noncurrent) - Deferred Tax Asset (Noncurrent)
- Noncurrent Net = ,000 - ,000 = ,000

Youngman Corporation Balance Sheet Presentation:

| Youngman Corporation Balance Sheet | | |
|--------------------------------------------------|---------|---------|
| December 31, 2014 | | |
| Current Deferred Tax Asset | | ,000 |
| Noncurrent Deferred Tax Liability | | ,000 |
| Total Deferred Tax Asset (Net) | ,000 | |
| Total Deferred Tax Liability | ,000 | |

Conclusion

The accounting for income taxes can often include intricate details involving the treatment of temporary differences and deferred taxes. Following the provided exercises, we illustrate how to carefully compute and journalize tax-related transactions, ensuring compliance with accounting principles such as GAAP (Generally Accepted Accounting Principles).

References

1. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. John Wiley & Sons.
2. Spiceland, J. D., Nelson, M. W., & Thomas, M. D. (2019). Intermediate Accounting. McGraw-Hill Education.
3. Davis, J. A., & Pinnegar, K. (2020). Principles of Accounting. Cengage Learning.
4. FASB (Accounting Standards Codification) (2021). FASB Accounting Standards Codification. Financial Accounting Standards Board.
5. AICPA. (2020). Accounts and Auditing Standards. American Institute of Certified Public Accountants.
6. McGraw Hill Education. (2019). Taxation for Accountants. McGraw-Hill.
7. IFRS Foundation. (2020). International Financial Reporting Standards. IFRS Foundation.
8. U.S. Internal Revenue Service. (2021). Federal Income Tax Guide. IRS.gov.
9. Gaertner, F. D., & Gaertner, K. E. (2017). Understanding Tax Accounting. Cengage Learning.
10. Henssler, C. A. (2021). Applied Accounting for Assets, Liabilities, and Equity. Wiley.
By following through these exercises, students become adept at handling various situations involving tax accounting, an essential domain in the broader field of accounting.