ACCT 312 Week 1 Homework Solutions, E16-3, E16-5, E16-10, E16-22


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ACCT 312 Week 1 Homework Answers

E16-3: Taxable Income given; Calculate differed tax liability

Ayres Services acquired an asset for $80 million in 2016. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2016, 2017, 2018, and 2019 are as follows:

E16-5: Temporary difference; future deductible amounts; taxable income given

Lance Lawn Services reports warranty expense by estimating the amount that eventually will be … satisfy warranties on its product sales. For tax purposes, the expense is deducted when the cost is incurred. At December 31, 2016, Lance has a warranty liability of $1 million and taxable income of $75 million. At December 31, 2015, Lance reported a deferred tax asset of $435,000 related to this difference in reporting warranties, its only temporary difference. The enacted tax rate is 40% each year.

E16-10: Deferred tax asset; taxable income given; valuation allowance

At the end of 2015, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2016, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2016 is $180 million and the tax rate is 40%.

E16-22: Operating loss carry-back and carry-forward

(This exercise is based on the situation described inE 16-21, modified to include a carryforward in addition to a carryback.)

Wynn Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2016. The enacted tax rate is 40%. Taxable income, tax rates, and income taxes ….in Wynn‘s first four years of operation were as follows:

(Excel and Word Format)acct 312 week 1 homework answers

ACCT 312 Week 1 Homework