Chapter 17-19 Possible Problems Essay
Outline Review for Chapters 17-19 Possible Problems
1.—Permanent and temporary differences.
Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences or temporary differences. For temporary differences, indicate whether they will create deferred tax assets or deferred tax liabilities. 1. Investments accounted for by the equity method. 2. Advance rental receipts. 3. Fine for polluting. 4. Estimated future warranty costs. 5. Excess of contributions over pension expense. 6. Expenses incurred in obtaining tax-exempt revenue. 7. Installment sales. 8. Excess tax depreciation over accounting depreciation. 9. Long-term construction contracts. …show more content…
The estimated litigation expenses of $840,000 will be deductible in 2013 when settlement is expected.
Instructions
(a) Prepare a schedule of future taxable and deductible amounts.
(b) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2010, assuming a tax rate of 40% for all years.
3. Journal entries—percentage-of-completion.
Dixon Construction Company was awarded a contract to construct an interchange at the junction of U.S. 94 and Highway 30 at a total contract price of $8,000,000. The estimated total costs to complete the project were $6,000,000.
Instructions
(a) Make the entry to record construction costs of $3,600,000, on construction in process to date.
(b) Make the entry to record progress billings of $2,000,000.
(c) Make the entry to recognize the profit that can be recognized to date, on a percentage-of-completion basis.
4. Percentage-of-completion
1.—Permanent and temporary differences.
Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences or temporary differences. For temporary differences, indicate whether they will create deferred tax assets or deferred tax liabilities. 1. Investments accounted for by the equity method. 2. Advance rental receipts. 3. Fine for polluting. 4. Estimated future warranty costs. 5. Excess of contributions over pension expense. 6. Expenses incurred in obtaining tax-exempt revenue. 7. Installment sales. 8. Excess tax depreciation over accounting depreciation. 9. Long-term construction contracts. …show more content…
The estimated litigation expenses of $840,000 will be deductible in 2013 when settlement is expected.
Instructions
(a) Prepare a schedule of future taxable and deductible amounts.
(b) Prepare the journal entry to record income tax expense, deferred taxes, and income taxes payable for 2010, assuming a tax rate of 40% for all years.
3. Journal entries—percentage-of-completion.
Dixon Construction Company was awarded a contract to construct an interchange at the junction of U.S. 94 and Highway 30 at a total contract price of $8,000,000. The estimated total costs to complete the project were $6,000,000.
Instructions
(a) Make the entry to record construction costs of $3,600,000, on construction in process to date.
(b) Make the entry to record progress billings of $2,000,000.
(c) Make the entry to recognize the profit that can be recognized to date, on a percentage-of-completion basis.
4. Percentage-of-completion