Make uses the deferred method to account for interperiod

Assignment Help Financial Accounting

Reference no: EM132664988

Accounting for Income Taxes: Different Approaches

Mark or Make is a bourbon distillery. Sales have been steady for the past three years, and operating costs have remained unchanged. On January 1, 2019, Mark or Make took advantage of a special deal to prepay its rent for three years at a substantial savings. The amount of the prepayment was $60,000. The income statement items (excluding the rent) are shown here.

2019 2020 2021

Gross profit on sales: 350,000 349,000 351,000

Operating expense: 210,000 210,000 210,000

Problem a) For years 2019 and 2020, Mark or Make reported net income applying the concept of comprehensive interperiod income tax allocation. During 2020, Congress passed a new tax law that will increase the corporate tax rate from 30 to 33%. Reconstruct the income statements for 2020 and 2019 under the following assumptions:

i) Mark or Make uses the deferred method to account for interperiod income tax allocation?

ii) Mark or Make uses the asset-liability approach to account for interperiod income tax allocation?

Problem b) Which of the two approaches used in question (a) provides measures of income and liabilities that are useful to decision makers? Explain.

Reference no: EM132664988

Questions Cloud

Compute what total amount of manufacturing costs assigned : Find What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September

Discuss why market research is important : Critically discuss why market research is important for a product oriented business firm?

Which countries or organizations can help the employees : Which countries or organizations, can help their employees including those who have just lost their jobs, go through this difficult times of the corona virus

What are some of the organizational criteria : What are some of the organizational criteria that could be used to define a good organization? Do any of these criteria conflict? Are there any other criteria.

Make uses the deferred method to account for interperiod : Accounting for Income Taxes: Different Approaches. Make uses the deferred method to account for interperiod income tax allocation?

Define intervention strategies for preventing future crisis : Based on Nannie Doss' information, recommend appropriate intervention strategies for preventing future crisis. Describe these interventions and justify.

When considering investing strategies using a few ratios : When considering investing strategies using a few ratios, such as price/earnings ratio, the dividend payout ratio, the dividend yield, book value

What are the benefits and drawbacks to such a policy : "To what extent is requiring affirmative consent a solution to the problem of campus sexual assault? What are the benefits and drawbacks to such a policy?"

Establish a new organization structure : As a managing director of a architecture company, Abdul Hadi wants to establish a new organization structure in her company.

User Account

All Pages