What is the income tax payable on december 31

Reference no: EM132954864

1. Use the following information for the questions 2 and 3

On January 1, 20x1, IMBROGLIO Co. (lessor) leased a piece of equipment to COMPLICATION, Inc. Information on the lease is shown below:

Cost of equipment ?1,200,000

Useful life of equipment 5 years

Lease term 4 years

Annual rent payable at the start of each year ?400,000

Interest rate implicit in the lease 10%

IMBROGLIO Co. incurred initial direct costs of ?80,000.

2. How much is the gross investment in the lease on January 1, 20x1 after the first lease payment if the lease is accounted for as a sales type lease?

3. What amount of net selling profit should IMBROGLIO recognize at the lease commencement date if the lease is accounted for as a sales type lease?

4. Information on a lease is shown below:

Cost of equipment ?1,200,000

Useful life of equipment 5 years

Lease term 4 years

Annual rent payable at the end of each year ?400,000

Interest rate implicit in the lease 10%

Residual value ?80,000

The lease provides that ownership over the equipment will be transferred to the lessee at the end of the lease term. What amount of net investment in the lease should the lessor recognize at the commencement date?

5 Wall Co. leased office premises to Fox, Inc. for a five-year term beginning January 2, 20x9. Under the terms of the operating lease, rent for the first year is ?8,000 and rent for years 2 through 5 is ?12,500 per annum. However, as an inducement to enter the lease, Wall granted Fox the first six months of the lease rent-free. In its December 31, 20x9, income statement, what amount should Wall report as rental income?

Use the following information for the questions 6,7,8

Frey Corporation's income statement for the year ended December 31, 2002, shows pretax income of ?1,000,000. The following items are treated differently on the tax return and in the accounting records:

TaxReturn AccountingRecords

Rent income ? 70,000 ?120,000

Depreciation expense 280,000 220,000

Premiums on officers' life insurance - 90,000

Frey's tax rate for 2002 is 30 percent.

6. How much is the income tax expense for 2002?

7. How much is the current tax expense for 2002?

8. How much is the deferred tax expense (benefit) for 2002?

9. On January 1, 20x1, ABC Co. does not have any temporary differences. However, during the year, ABC identified that temporary difference may result from a warranty expense of ?120,000 that was recognized for financial reporting during 20x1. For taxation purposes, warranty expense is tax deductible only when paid. Warranty costs paid during the year totaled ?50,000. It is expected that the remaining accrued warranty costs will be paid as follows: ?40,000 in 20x2 and ?30,000 in 20x3. Income tax rate for 20x1 is 30%. However, a new tax law was enacted on December 31, 20x1. Under the new law, tax rate for 20x2 is 32% and tax rate in 20x3 and years thereafter is 35%. How much is the deferred tax asset on December 31, 20x1?

10. In 2010, Truman Co. reported pretax financial income of P5,000,000 which includes P900,000 nontaxable life insurance proceeds received as a result of the death of an officer, P1,200,000 of estimated warranty expenses accrued as of December 31, 2010, and P200,000 of life insurance premiums for a policy of an officer. No income tax was previously paid during the year and the income tax rate is 30%. What is the income tax payable on December 31, 2010?

Reference no: EM132954864

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