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    Abc 2

    Uploaded by

    Kath Leynes
    The documents provide information about the income and expenses reported for tax purposes versus accounting purposes for multiple companies in 2008. Based on the timing differences and tax rates provided, the summaries calculate the current income tax liability or income tax payable for each company. The amounts calculated are: Tracker - $106,800; Frey - $294,000; Inventive - $130,000; and Dider's taxable income is $903,000. Wyatt should credit $1,125,000 to its common stock account upon conversion of preferred stock to common stock.

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    Abc 2

    Uploaded by

    Kath Leynes
    197 views2 pages
    The documents provide information about the income and expenses reported for tax purposes versus accounting purposes for multiple companies in 2008. Based on the timing differences and tax rates provided, the summaries calculate the current income tax liability or income tax payable for each company. The amounts calculated are: Tracker - $106,800; Frey - $294,000; Inventive - $130,000; and Dider's taxable income is $903,000. Wyatt should credit $1,125,000 to its common stock account upon conversion of preferred stock to common stock.

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    abc2

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    The documents provide information about the income and expenses reported for tax purposes versus accounting purposes for multiple companies in 2008. Based on the timing differences and tax rates provided, the summaries calculate the current income tax liability or income tax payable for each company. The amounts calculated are: Tracker - $106,800; Frey - $294,000; Inventive - $130,000; and Dider's taxable income is $903,000. Wyatt should credit $1,125,000 to its common stock account upon conversion of preferred stock to common stock.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    197 views2 pages

    Abc 2

    Uploaded by

    Kath Leynes
    The documents provide information about the income and expenses reported for tax purposes versus accounting purposes for multiple companies in 2008. Based on the timing differences and tax rates provided, the summaries calculate the current income tax liability or income tax payable for each company. The amounts calculated are: Tracker - $106,800; Frey - $294,000; Inventive - $130,000; and Dider's taxable income is $903,000. Wyatt should credit $1,125,000 to its common stock account upon conversion of preferred stock to common stock.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1.

    The books of the Tracker Company for the year ended December 31, 2008, showed pretax
    income of P360,000. In computing the taxable income for federal income tax purposes, the
    following timing differences were taken into account:
    Depreciation deducted for tax purposes in excess of
    depreciation recorded on the books ................... P16,000
    Income from installment sale reportable for tax purposes
    in excess of income recognized on the books .......... 12,000

    What should Tracker record as its current income tax liability at December 31, 2008,
    assuming a corporate income tax rate of 30 percent? (106,800)

    2. Frey Corporation's income statement for the year ended December 31, 2008, shows pretax
    income of P1,000,000. The following items are treated differently on the tax return and in the
    accounting records:
    Tax Accounting
    Return Records
    Rent income ........................... P 70,000 P120,000
    Depreciation expense .................. 280,000 220,000
    Premiums on officers' life insurance .. -- 90,000
    Assume that Frey's tax rate for 2008 is 30 percent. What is the amount of income tax payable
    for 2008? (294,000)

    3. Inventive Corporation's income statement for the year ended December 31, 2008, shows pretax
    income of P300,000. The following items are treated differently on the tax return and in the
    accounting records:

    Tax Accounting
    Return Records
    Warranty expense ...................... P170,000 P185,500
    Depreciation expense .................. 150,000 100,000
    Premiums on officers' life insurance .. -- 60,000

    Assume that Inventive's tax rate for 2008 is 40 percent. What is the current portion of
    Inventive's total income tax expense for 2008? (130,000)

    4. The following differences between financial and taxable income were reported by Dider
    Corporation for the current year:

    (a) Excess of tax depreciation over book depreciation .... P60,000


    (b) Interest revenue on municipal bonds .................. 9,000
    (c) Excess of estimated warranty expense over actual
    expenditures ......................................... 54,000
    (d) Unearned rent received ............................... 12,000
    (e) Fines paid ........................................... 30,000
    (f) Excess of income reported under percentage-of-completion
    accounting for financial reporting over
    completed-contract accounting used for tax reporting . 45,000
    (g) Interest on indebtedness incurred to purchase tax-exempt
    securities .................................... 3,000
    (h) Unrealized losses on marketable securities recognized
    for financial reporting .............................. 18,000

    Assume that Dider Corporation had pretax accounting income [before considering items (a)
    through (h)] of P900,000 for the current year. Compute the taxable income for the current
    year. (903,000)

    5. In 2008, Wyatt Corporation issued for P110 per share, 15,000 shares of P100 par value
    convertible preferred stock. One share of preferred stock may be converted into three shares of
    Wyatt's P25 par value common stock at the option of the preferred shareholder. On December
    31, 2009, all of the preferred stock was converted into common stock. The market value of the
    common stock at the conversion date was P40 per share.

    What amount should be credited to the common stock account on December 31,
    2009? (1,125,000)

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