ACCTG 334 – Intermediate Accounting IISpring 2024
Exam #2 – Answer Sheets
Last Name:
First Name:
Red ID:
ALL ANSWERS MUST BE PROVIDED ON THIS ANSWER SHEET, IN THE SPACES
PROVIDED
PROBLEM #1
STEP 1: ADJUST PRETAX NET INCOME/LOSS FOR ALL PERMANENT DIFFERENCES
YEAR _________
YEAR _________
GAAP Income Before Taxes
GAAP Taxable Income
STEP 2: IDENTIFY ALL TEMPORARY DIFFERENCES
YEAR _________
YEAR _________
GAAP Taxable Income
IRS Taxable Income
STEP 3: CALCULATE CURRENT INCOME TAX EXPENSE/INCOME TAXES PAYABLE
YEAR _________
YEAR _________
IRS Taxable Income
Current Year’s Tax Rate
JE: CR INCOME TAXES PAYABLE
DTA
Valuation
Allowance
DTL
2023 BB
2023 BB
2023 BB
2023 EB
2023 EB
2023 EB
2024 Tax Change
2024 Tax Change
2024 Tax Change
2024 EB
2024 EB
2024 EB
TAX J/E
DATE DR/CR ACCOUNT
AMOUNT
PROBLEM #2
DATE DR/CR ACCOUNT
AMOUNT
Total Shares Outstanding
Shares Outstanding =
Par Value =
The following information is available for Eliza Corporation for 2023:
1. Depreciation reported on the tax return exceeded depreciation reported on the
income statement by $201,000. The differences will reverse as follows:
2024
134,00
0
2025
33,500
2026
33,500
2. Annual interest received on municipal bonds was $13,000 in 2023 and $15,000 in
2024.
3. Rent collected in advance on September 1, 2023, totaled $117,000 for a 3-year
period. Rent was recognized monthly, starting on September 1, 2023 for book
purposes.
4. During 2023 and 2024, Eliza paid $20,000 (each year) for a life insurance policy
on its executives, with Eliza as the beneficiary. In 2024, Eliza received $250,000 due
to the untimely passing of its CFO.
5. The tax rates are 20% for 2023 and 2024, and 30% for 2025 and beyond.
6. A contingent loss due to litigation was accrued in 2023 for $250,000. The company
expects to pay the loss in 2025.
7. Pretax financial income for the year ended December 31, 2023 was $6,150,000,
and $6,550,000 for the year ended December 31, 2024.
8. The company has a $5,800 credit balance in the Valuation Allowance and a
beginning balance of $17,000 in the DTA account due to a temporary difference of
$85,000 caused by a deferred revenues for GAAP purposes. The difference was
realized for tax purposes in 2023.
9. Of the ending balance of the DTA account, the company believes that it is “more
likely than not” that 14% will not be realized.
10. On 1/1/2024, a surprise tax cut was implemented, causing the 2024 tax rate to
increase by 2%, and the 2025 and beyond tax rates to decrease by 2%. What is the
journal entry to record the adjustment to the DTA/DTL balances, and the valuation
allowance.
Instructions
Assuming no other differences between book and taxable incomes existed, except
for those mentioned above, prepare the 2024 tax rate change journal entry, and the
year end income tax journal entries to record Income Tax Expense, Deferred Tax
Asset/Liability, Income Taxes Payable and Valuation Allowance for 2024 (separate
the valuation allowance journal entry from the income tax expense journal entry).
Upon completion, upload a JPEG/JPG of your Accounting for Income Taxes Problem
Answer Sheet.
You may take one photo of the multiple pages, as long as they are readable.
Assuming no other differences between book and taxable incomes existed, except for
those mentioned above, prepare the year end income tax journal entries to record
Income Tax Expense, Deferred Tax Asset/Liability, Income Taxes Payable.
FORMAT YOUR ANSWER AS FOLLOWS:
DR ACCOUNT NAME $AMOUNT
CR ACCOUNT NAME $AMOUNT
Assuming no other differences between book and taxable incomes existed, except for
those mentioned above, prepare the year end Valuation Allowance journal entry for
12/31/2023.
FORMAT YOUR ANSWER AS FOLLOWS:
DR ACCOUNT NAME $AMOUNT
CR ACCOUNT NAME $AMOUNT
Presented below is information related to NewCo Corp shareholder transactions
during 2023:
1. On January 1, the company was formed, and was authorized to issue 500,000
shares of $10 par value common stock.
2. On January 2, 225,000 shares were issued for $45 per share.
3. On March 31, NewCo issued a 3:2 stock split, in the form of a 50% stock
dividend, when the shares were valued at $48 per share.
4. On April 15, NewCo issued and distributed a 3% stock dividend, when the shares
were valued at $10 per share. Shareholders with fractional shares were paid cash
(totaling 1,350 equivalent whole shares).
5. On June 30, NewCo declared a cash dividend of $0.35, payable to the
shareholders of record on July 15, to be paid on July 25.
6. On August 2, the company purchases 5,625 shares of the common stock
outstanding at $8 per share and retired the shares.
7. On August 15, the company purchases 6,188 shares of the common stock
outstanding at $11 per share and retired the shares.
8. On December 1, the board of directors declared a property dividend consisting of
corporate bonds of Lopez Corporation that NewCo Corp was holding as an
investment. The bonds were originally purchased for $1.9 million were classified as
held-to-maturity investments. The bonds currently have a fair value of $1.75 million.
The property dividend was payable to shareholders of record December 15, and
distributed on December 31.
Instructions
(a) Prepare the general journal entries necessary to record these transactions.
Identify each transaction by the date, and if no entry is required, write “No Entry.”
(b) How many shares were outstanding as of December 31, 2023.
Upon completion, upload a JPEG/JPG of your Shareholders’ Equity Problem Answer
Sheet.
You may take one photo of the multiple pages, as long as they are readable.
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