Hi! I need help with some accounting questions (see attachment). Thanks in advance!

Hi! I need help with some accounting questions (see attachment). Thanks in advance!

ATTACHMENT PREVIEW

Download attachment

The following information relates to Baba Inc.’s transactions during 2012:

2012 is Baba Inc.’s second year of operation.

Baba Inc. is a construction company.

The company employs private enterprise GAAP and uses the future income taxes
method.

In the foreseeable future, taxable income is expected.

On the income statement, income before taxes was $835000.

Recent tax rate changes have been enacted as follows: 40% for 2011, 35% for 2012
and future years. The rates were enacted on January 1 each year, respectively.

Warranty expense for financial reporting purposes was $85000. Actual warranty
payouts made during the year were $69000. Warranty liabilities are classified as
current on the balance sheet. In 2011, the recorded warranty expense exceeded the
actual payouts by $30000.

Gross profit from construction contracts amounted to $57000, using the percentage
of completion method for accounting purposes. The gross profit on construction
contracts for tax purposes was $0 because the completed contract method was used
and no contracts were completed during the year. In 2011, no construction contracts
were begun or completed.

Depreciation on property, plant, and equipment for financial reporting purposes was
$225000. CCA reported on the tax return amounted to $290000. On January 1,
2012, the carrying amount of the property, plant, and equipment was $1000000 and
the UCC was $850000.

$5000 for a private golf course was deducted as a promotional expense in
determining net income.
Problems:
1.
Prepare all required journal entries to record Baba Inc.’s income taxes for the year
ended December 31, 2012.
2.
Prepare a partial income statement for 2012, beginning with “Income before income
taxes.”

Leave a Comment