ACCT 557 Week 2 Homework Assignment: Chapter 19
Problem 1:
California Surplus Inc. qualifies to use the installment-sales method for tax purposes and sold an investment on an installment basis. The total gain of $75000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years; one-third of the sale price is collected in 2014 and the rest in 2015 and 2016. The tax rate was 35% in 2012, 30% in 2013, and 30% in 2014. The enacted tax rates of 2013 and 2014 are not known until 2013. The accounting and tax data are shown below……………..
Problem 2:
Trenton Co. incurred a net operating loss of $850,000 in 2014. Combined income of 2012 and 2013 was $650,000. The tax rate for all years is 30%. Trenton elects the carry back option. Required:
a. Prepare the journal entries to record the benefit of loss carry back and loss carry forward option.
b. Assuming that it is more likely than not that the entire net operating loss carry forward will not be realized in future years, prepare all the journal entries necessary at the end of 2014………………Summer 2016
