Case study on advanced financial accounting assignment. Information related to Allman’s operations for 2016 are given below.
1. In 2016, the company completed seven (7) contracts that allow for the customer to pay on an installment basis. Allman recognized the related gross profit of $560,000 (7 x 80,000) for financial reporting purposes. It reported only $112,000 (20% x 560,000) of gross profit on installment sales on the 2016 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of $112,000 in each of the next four years.
2. At the beginning of 2016, Allman Company purchased depreciable assets with a cost of $540,000. For book purposes, Asset depreciates using the SLM over 6 yrs. For tax purposes, the assets fall in the five- year recovery class, and Allman uses the MACRS system Depreciation computation year depre.book purpose depre.tax purpose difference 2016……..90,000 108,000 (18,000) 2017………90,000 172800 (82800) 2018…………90,000 103,680 (13680) 2019…………..90,000 62208 27792 2020…………..90,000 62208 27792 2021……………90,000 31104 58896 total 540,000 540,000 -0-
1.During 2016, the product warranty liability accrued for book purposes was $200,000, and the actual paid-for warranty liability was $44,000. Allman expects to settle the remaining $156,000 by expenditures of $56,000 in 2017 and $100,000 in 2018.
2.In 2016, nontaxable municipal bond interest revenue was $28,000.
3.In 2016, nondeductible fines and penalties of $26,000 were paid.
4.Pretax financial income for 2016 amounts to $412,000.
5.Tax rates enacted up to 2016 were 50% and for 2017 and later years 40%. Required:
1. Identify temporary and permanent differences.
2. Determine taxable income of 2016?
3. Computes income taxes payable for 2016?
4. Compute future taxable amount (DTL) at the end of 2016?
5. Compute future deductible amount (DTA) at the end of 2016?
6. Compute net deferred tax expense (DTL – DTA) for 2016?
7. Compute total income tax expense (deferred + current) of 2016?
8. Records income taxes payable, deferred income taxes, and income tax expense of 2016?
9. Show the financial presentation *AI Please make clearly the correct answer and the correct journal entries by charts or by tables.
