Question description
Colorado Company
has provided you the following information.
Year Taxable income Income tax rate
2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay $390,000 35%
2015 – Research Paper Writing Help Service $320,000 37%
2016: 2024 – Do my homework – Help write my assignment online $400,000 40%
2017 ($1,200,000) 40%
Colorado Company has decided to use the loss carryback and
carryforward provision as a result of the year 2017 loss. The enacted tax rate
remains at 40% after year 2017. Colorado Company has determined that a
valuation allowance is not necessary.
Prepare the journal entry on December 31, 2017 to record the
carryback and carryforward decision.Part B (30 points)
The Matrix Company began operations as of the beginningof
2015 – Research Paper Writing Help Service. During 2015 – Research Paper Writing Help Service, Matrix reported GAAP
(book) income before taxes of $789,500. For income tax purposes, depreciation
expense was $150,000; for GAAP (book) purposes, depreciation expense was
$74,000. Matrix accrued $900,000 of revenue for GAAP (book) purposes during
2015 – Research Paper Writing Help Service; $600,000 of the accrued revenue was taxable during 2015 – Research Paper Writing Help Service. Matrix earned
interest of $79,800 from a municipal bond investment during 2015 – Research Paper Writing Help Service. Matrix’s
marginal income tax rate is 40%. Matrix did not make any income tax payments
during 2015 – Research Paper Writing Help Service.
a. Determine
Matrix’s taxable income for the year ended December 31, 2015 – Research Paper Writing Help Service.
b.
Prepare the 2015 – Research Paper Writing Help Service year-end journal entry to record
income tax expense.
Taxable Income
Accrued Revenue
600,000x 40% = 240,000
Interest Earned 79,800
x 40% = 31,920
240,000
+ 31,920 = 271,920
Part C (30 points)
a. For
each of the items below, determine whether the items are temporary differences
orpermanent differences. Also, for each temporary difference, you are required
to determinewhether a deferred tax asset or deferred tax liability is created
by the temporarydifference described. Assume that each of the temporary
differences described is anoriginating difference.
1. Municipal
bond interest
2. Accrued
warranty expense
3. Sales
revenues received in advance
4. Prepaid
insurance where the tax deduction in future years will be less than the book
expense
5. Tax
depreciation expense exceeds GAAP (book) depreciation expense
6. Accrued
bad debt expense
7. The
dividends received deduction
8. Installment
sales revenue (recognized currently for GAAP, recognized for tax purposes when
cash is collected in future years)
9. Life
insurance payments for executives for which the company is the beneficiary
10. Fines
paid for law violationsary differences result in deferred tax assets or deferred tax
liabilities while permanent differences do not, and describe the difference in
the formation of deferred tax assets and deferred tax liabilities.
