Reference no: EM132463286
SuperSports Inc.reported pretax financial income of $260,000 for the year 2016. Taxable income of SuperSports is however different from its pretax financial income because of the items given below.
- Depreciation deducted on the tax return is $40,000 greater than the depreciation charged on Income Statement.
- Estimated Warranties Expenses charged to Income Statement is $30,000 but Warranties expenses deductible on tax return are $20,000
- $3,200 appear in the income statement of SuperSports as Fines and penalties paid.
- SuperSports received $ 6,000 interest from Tax Saving Municipal Bonds.
- Enacted Tax Rate for the year 2016 is 30% and for 2017 is 35%
Required: For the year 2016, SuperSports Inc. requests you to:
Question 1: Identify items of permanent and temporary difference from the information given
Question 2: What items of temporary difference result in future taxable amounts and what items will result in future deductible amounts
Question 3: Compute Taxable Income
Question 4: Compute current income tax expense/Tax payable
Question 5: Compute deferred taxes ( Deferred Tax Liability and Deferred Tax Asset)
Question 6: Record journal entry for Income Tax Expense
Question 7: Show how deferred taxes will be reported in the Balance Sheet.
Case Study Part B
SuperSports provides you the following pension data for the year 2016.
Item Service Cost, 2016 $248,000
Projected Benefit Obligation, January 2016 $340,000
Plan assets (fair value), Januray 1, 2016 $360,000
Prior Service Cost - AOCI (2016 amoritization, $25,000) $250,000
Net Loss - AOCI (2016 amoritization, $10,000) $110,000
Actual Return on Plan Assets $45,000
Interest rate and expected return on plan assets10%Contributions made to plan assets during 2016 $175,000
SuperSports requests you to:
- pension expense for the year 2016
- 2016 journal entry for pension expense