Q1
| The following information is available for Eliza Corporation for 2023: | ||
| 1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $201,000. The differences will reverse as follows: | ||
| 2024 | 134,000 | |
| 2025 | 33,500 | |
| 2026 | ||
| 2. Annual interest received on municipal bonds was $13,000 in 2023 and $15,000 in 2024. | ||
| 3. Rent collected in advance on September 1, 2023, totaled $117,000 for a 3-year period. Rent was recognized monthly, starting on September 1, 2023 for book purposes. | ||
| 4. During 2023 and 2024, Eliza paid $20,000 (each year) for a life insurance policy on its executives, with Eliza as the beneficiary. In 2024, Eliza received $250,000 due to the untimely passing of its CFO. | ||
| 5. The tax rates are 20% for 2023 and 2024, and 30% for 2025 and beyond. | ||
| 6. A contingent loss due to litigation was accrued in 2023 for $250,000. The company expects to pay the loss in 2025. | ||
| 7. Pretax financial income for the year ended December 31, 2023 was $6,150,000, and $6,550,000 for the year ended December 31, 2024. | ||
| 8. The company has a $5,800 credit balance in the Valuation Allowance and a beginning balance of $17,000 in the DTA account due to a temporary difference of $85,000 caused by a deferred revenues for GAAP purposes. The difference was realized for tax purposes in 2023. | ||
| 9. Of the ending balance of the DTA account, the company believes that it is “more likely than not” that 14% will not be realized. | ||
| 10. On 1/1/2024, a surprise tax cut was implemented, causing the 2024 tax rate to increase by 2%, and the 2025 and beyond tax rates to decrease by 2%. What is the journal entry to record the adjustment to the DTA/DTL balances, and the valuation allowance. |
Question 1:
Assuming no other differences between book and taxable incomes existed, except for those mentioned above, prepare the year end income tax journal entries to record Income Tax Expense, Deferred Tax Asset/Liability, Income Taxes Payable.
FORMAT YOUR ANSWER AS FOLLOWS:
DR ACCOUNT NAME $AMOUNT
CR ACCOUNT NAME $AMOUNT
Question 2:
Assuming no other differences between book and taxable incomes existed, except for those mentioned above, prepare the year end Valuation Allowance journal entry for 12/31/2023.
FORMAT YOUR ANSWER AS FOLLOWS:DR ACCOUNT NAME $AMOUNTCR ACCOUNT NAME $AMOUNT
-Upload your work for the Income Taxes Payable work (page 2 of the answer sheets), here.
Failure to upload your work in a readable format will result in a zero for the associated question.
-Upload your work regarding the calculations for the DTA, DTL & Valuation Allowance, here.
Failure to upload your work in a readable format will result in a zero for the associated question.
-Upload your handwritten J/E’s for both the income taxes & valuation allowance (page 3 of the answer sheets), here. Keep both the Income tax payable/DTA/DTL journal entry separate from the valuation allowance journal entry.
Failure to upload your work in a readable format will result in a zero for the associated question.
Q2
| Presented below is information related to NewCo Corp shareholder transactions during 2023: |
| 1. On January 1, the company was formed, and was authorized to issue 350,000 shares of $4 par value common stock. |
| 2. On January 2, 175,000 shares were issued for $16 per share. |
| 3. On March 31, NewCo issued a 3:2 stock split, in the form of a 50% stock dividend, when the shares were valued at $18 per share. |
| 4. On April 15, NewCo issued and distributed a 4% stock dividend, when the shares were valued at $12 per share. Shareholders with fractional shares were paid cash (totaling 1,050 equivalent whole shares). |
| 5. On June 30, NewCo declared a cash dividend of $0.25, payable to the shareholders of record on July 15, to be paid on July 25. |
| 6. On August 2, the company purchases 4,375 shares of the common stock outstanding at $7 per share and retired the shares. |
| 7. On August 15, the company purchases 4,813 shares of the common stock outstanding at $10 per share and retired the shares. |
| 8. On December 1, the board of directors declared a property dividend consisting of corporate bonds of Lopez Corporation that NewCo Corp was holding as an investment. The bonds were originally purchased for $1.75 million were classified as held-to-maturity investments. The bonds currently have a fair value of $1.65 million. The property dividend was payable to shareholders of record December 15, and distributed on December 31. |
| Instructions |
| (a) Prepare the general journal entries necessary to record these transactions. Identify each transaction by the date, and if no entry is required, write “No Entry.” |
| (b) How many shares were outstanding as of December 31, 2023.
Upload your J/E’s for the shareholders’ equity problem (page 4 of the answer sheets), here. Ensure that you have either journal entries for each date provided, or a the date listed, with “No Journal Entry Required.” Please use the attached form to show your work and upload that when this assignment is complete. Please let me known if you have any questions. |
ACCTG 334 – Intermediate Accounting II
Spring 2024
Exam #2 – Answer Sheets
Last Name:
First Name:
Red ID:
ALL ANSWERS MUST BE PROVIDED ON THIS ANSWER SHEET, IN THE SPACES
PROVIDED
PROBLEM #1
STEP 1: ADJUST PRETAX NET INCOME/LOSS FOR ALL PERMANENT DIFFERENCES
YEAR _________
YEAR _________
YEAR _________
GAAP Income Before Taxes
Permanent Difference #1
Permanent Difference #2
GAAP Taxable Income
STEP 2: IDENTIFY ALL TEMPORARY DIFFERENCES
YEAR _________
YEAR _________
YEAR _________
GAAP Taxable Income
Temporary Difference #1
Temporary Difference #2
Temporary Difference #3
Temporary Difference #4
IRS Taxable Income
STEP 3: CALCULATE CURRENT INCOME TAX EXPENSE/INCOME TAXES PAYABLE
YEAR _________
YEAR _________
YEAR _________
IRS Taxable Income
Current Year’s Tax Rate
JE: CR INCOME TAXES PAYABLE
DTA
DTL
Valuation Allow
DATE DR/CR ACCOUNT
AMOUNT
PROBLEM #2
DATE DR/CR ACCOUNT
AMOUNT
Total Shares Outstanding
Shares Outstanding =
Par Value =
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