Can someone explain why a change in inventory valuation method would result in a deferred tax...
Can someone explain why a change in inventory valuation method would result in a deferred tax liability/asset? Let's say you use FIFO for financial reporting, but average-cost for income taxes. How would this reverse itself over time? This seems like a permanent difference to me, but apparently, it's not.
Thanks!
Homework Answers
Deferred tax asset or liability arises because of difference in income due to inventory valuation. It will get reversed over time when inventory gets consumed or difference in inventory is minimal between 2 methods. Also in future when inventory valuation under both financial reporting and tax reporting is same it should get nullified. But if there are 2 different methods of inventory valuation and if inventory valuation difference is large you are right in one way it will be like permanent difference though it is not. I think any company management will notice this and they will surely align both methods of inventory valuation. Financial Reporting Department and Head -Controller are bound to review this balances and take necessary action.
But you should understand inventory keeps getting consumed Hence DTA/DTL balances will keep changing.
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Can someone explain why a change in inventory valuation method
would result in a deferred tax...
15. Which of the following statements is correct? a. All current deferred tax liabilities and assets...
15. Which of the following statements is correct? a. All current deferred tax liabilities and assets shall be offset and presented as a single amount on the balance sheet. b. Deferred tax assets related to carryforwards shall be classified as current or noncurrent on the balance sheet based on their expected date of reversal. c. All current and noncurrent deferred taxes shall be offset and presented as a single amount on the balance sheet. d. Deferred tax liabilities and assets...
2) At the end of 2017, Hoover company had reported a deferred tax asset of $72...
2) At the end of 2017, Hoover company had reported a deferred tax asset of $72 million with no valuation allowance. At December 31, 2018, the account balances of Hoover showed a deferred tax asset of $80 million before assessing the need for a valuation allowance and income taxes payable of $56 million. Hoover determined that it was more likely than not that 20% of the deferred tax asset ultimately would not be realized. Hoover made no estimated tax payuments...
can someone please explain the illustration 16-1 and illustration 16-1A to me. I have to understand...
can someone please explain the illustration 16-1 and
illustration 16-1A to me. I have to understand this before the exam
tomorrow.
(I provided extra info if u need it)
TEMPORARY DIFFERENCES LO16-1 Describe the tybes of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes. The differences in the rules for computing taxable income and those for financial reporting often cause amounts to be included in taxable income in a year...
3. At January 1, 2018, HD had a deferred tax asset of 590 million with no...
3. At January 1, 2018, HD had a deferred tax asset of 590 million with no valuation allowance. At December 31, 2018, the account balances of HD Services showed a deferred tax asset ofS120 million befre assessing the need for a valuation allowance and income taxes payable of 580 million. HD determined that it was more likely that 30% of the deferred tax asset ultimately would not be realized. HD made no estimmated tat payments during 2018. What amount should...
Can someone help me answer these? 1) 2) Novak Corp. uses a periodic inventory system. Details...
Can someone help me answer these?
1)
2)
Novak Corp. uses a periodic inventory system. Details for the inventory account for the month of January 2017 are as follows: Balance, 1/1/2017 Purchase, 1/15/2017 Purchase, 1/28/2017 Units 370 180 180 Per unit price $6.0 7 Total $2220 1170 1206 An end of the month (1/31/2017) inventory showed that 290 units were on hand. If the company uses LIFO, what is the value of the ending inventory? The accountant at Metlock, Inc....
Hondo Company began operations several years ago and has used the average-cost method of inventory valuation...
Hondo Company began operations several years ago and has used the average-cost method of inventory valuation since its inception. In 2019, it decides to switch to the FIFO method. You are provided with the following information. Net Income Excess of Average Under Cost over FIFO Cost Net Income Average Cost Goods Sold (Pretax) FIFO Basis Years Prior to 2017 $370,000 $72,000 2017 340,000 60,000 2018 320,000 44,000 2019 $380,000 Instructions: 1....
2.) Discuss how marketable securities are valued on the balance sheet. 3.) How can the allowance...
2.) Discuss how marketable securities are valued on the balance sheet. 3.) How can the allowance for doubtful accounts be used to assess earnings quality? 4.) Why is the valuation of inventories important in financial reporting? 5.) Why would a company switch to the LIFO method of inventory valuation in an inflationary period? 6.) Which inventory valuation method, FIFO or LIFO, will generally produce an ending inventory value on the balance sheet that is closest to current cost? 7.) Discuss...
Company began operations several years ago and has used the average-cost method of inventory valuation since its inception. In 2019, it decides to switch to the FIFO method. You are provided with the...
Company began operations several years ago and has used the average-cost method of inventory valuation since its inception. In 2019, it decides to switch to the FIFO method. You are provided with the following information. Net income under avg cost Excess of average cost over fifo cost goods sold pretax Net income FIFO basis Years prior 2017 $370,000 $72,000 2017 $340,000 60,000 2018 $320,000 44,000 2019 $380,000 Instructions: 1. Prepare the journal entry to record the change from the Average...
Exercise 19-5 (Part Level Submission) The following facts relate to Marigold Corporation. 1. Deferred tax liability, Ja...
Exercise 19-5 (Part Level Submission) The following facts relate to Marigold Corporation. 1. Deferred tax liability, January 1, 2017, $44,400. 2. Deferred tax asset, January 1, 2017, $0. 3. Taxable income for 2017, $105,450. 4. Pretax financial income for 2017, $222,000. 5. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $266,400. 6. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $38,850. 7. Tax rate for all years, 40%. 8. The...
Use the information below to answer the question above. Can someone help me with this question,...
Use the information below to answer the question above.
Can someone help me with this question, please? it shows the
answer as b) $4050 but I dont know how it got that? is it a
deferred tax asset or deferred tax liability? show your work and
thanks in advance!
here PTFI is just abbreviation for pretax financial income and
TI is an abbreviation for taxable income.
10. Assume an enacted tax rate of 30% for all years. The rates are...
2) At the end of 2017, Hoover company had reported a deferred tax asset of $72 million with no valuation allowance. At December 31, 2018, the account balances of Hoover showed a deferred tax asset of $80 million before assessing the need for a valuation allowance and income taxes payable of $56 million. Hoover determined that it was more likely than not that 20% of the deferred tax asset ultimately would not be realized. Hoover made no estimated tax payuments...
can someone please explain the illustration 16-1 and
illustration 16-1A to me. I have to understand this before the exam
tomorrow.
(I provided extra info if u need it)
TEMPORARY DIFFERENCES LO16-1 Describe the tybes of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes. The differences in the rules for computing taxable income and those for financial reporting often cause amounts to be included in taxable income in a year...
3. At January 1, 2018, HD had a deferred tax asset of 590 million with no valuation allowance. At December 31, 2018, the account balances of HD Services showed a deferred tax asset ofS120 million befre assessing the need for a valuation allowance and income taxes payable of 580 million. HD determined that it was more likely that 30% of the deferred tax asset ultimately would not be realized. HD made no estimmated tat payments during 2018. What amount should...
Can someone help me answer these?
1)
2)
Novak Corp. uses a periodic inventory system. Details for the inventory account for the month of January 2017 are as follows: Balance, 1/1/2017 Purchase, 1/15/2017 Purchase, 1/28/2017 Units 370 180 180 Per unit price $6.0 7 Total $2220 1170 1206 An end of the month (1/31/2017) inventory showed that 290 units were on hand. If the company uses LIFO, what is the value of the ending inventory? The accountant at Metlock, Inc....
Exercise 19-5 (Part Level Submission) The following facts relate to Marigold Corporation. 1. Deferred tax liability, January 1, 2017, $44,400. 2. Deferred tax asset, January 1, 2017, $0. 3. Taxable income for 2017, $105,450. 4. Pretax financial income for 2017, $222,000. 5. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $266,400. 6. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $38,850. 7. Tax rate for all years, 40%. 8. The...
Use the information below to answer the question above.
Can someone help me with this question, please? it shows the
answer as b) $4050 but I dont know how it got that? is it a
deferred tax asset or deferred tax liability? show your work and
thanks in advance!
here PTFI is just abbreviation for pretax financial income and
TI is an abbreviation for taxable income.
10. Assume an enacted tax rate of 30% for all years. The rates are...
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