Here you go—worked step-by-step and tidy.

1) Mrs. Lucia — tax base

 Tax base (amount subject to tax): $15,000
 Tax payable (10% × $15,000): $1,500

2) ABC Co. — book vs. tax (2015–2017, tax

rate = 40%)
Given
Book each year: Revenue $130,000; Expenses $60,000 → Pretax financial income = $70,000.
Taxable revenues: 2015 $100,000; 2016 $150,000; 2017 $140,000 (expenses are $60,000
each year).

(Q1) Financial-reporting income statements

(GAAP/IFRS)
Same each year because book numbers are level.

Yea Reven Expens Pretax Income tax expense Net

r ue es income (40%) income

201 130,00
60,000 70,000 28,000 42,000
5 0

201 130,00
60,000 70,000 28,000 42,000
6 0

201 130,00
60,000 70,000 28,000 42,000
7 0

(Q2) Tax-reporting income statements (tax return)

Tax-
Yea Taxable Taxable Income taxes Net income
deductible
r revenue income payable (40%) (tax basis)
expenses

201
100,000 60,000 40,000 16,000 24,000
5

201 150,000 60,000 90,000 36,000 54,000

 Tax-
Yea Taxable Taxable Income taxes Net income
deductible
r revenue income payable (40%) (tax basis)
expenses

201
140,000 60,000 80,000 32,000 48,000
7

(Q3) Compare Income Tax Expense vs. Income Taxes

Payable
(Temporary revenue-timing differences create a Deferred Tax Liability, DTL.)

Yea Tax expense Taxes payable Difference =

r (book) (current) ΔDTL

201 +12,000 (create

28,000 16,000
5 DTL)

201 –8,000 (DTL

28,000 36,000
6 reverses)

201 –4,000 (DTL

28,000 32,000
7 reverses)

DTL rollforward: start 0 → +12,000 (2015) → 4,000 (after 2016) → 0 (after 2017).
Journal pattern each year:

 2015: Dr Income Tax Expense 28,000; Cr Income Taxes Payable

16,000; Cr DTL 12,000.
 2016: Dr Income Tax Expense 28,000; Dr DTL 8,000; Cr Income
Taxes Payable 36,000.
 2017: Dr Income Tax Expense 28,000; Dr DTL 4,000; Cr Income
Taxes Payable 32,000.

3) A/R temporary difference at 12/31/2014

(tax basis = 0)
Assume tax rate 40%.

 Carrying amount (book) = Br 30,000; tax base = 0 → Taxable

temporary difference = 30,000.
  Deferred tax liability (DTL) = 30,000 × 40% = Br 12,000.
 The deferred portion of income tax expense for 2014 = Br 12,000
(current tax not given).
 Year-end entry (deferred only):
o Dr Income Tax Expense 12,000
o Cr Deferred Tax Liability 12,000

(Interpretation: revenue was recognized for books but will be taxed on cash collection, so a
DTL is required.)

4) Starfleet Corp. (one temporary difference;

tax rate = 30%)
Future taxable amounts from the 2018 temp difference: 2019 $55,000; 2020 $60,000; 2021
$75,000 → Total taxable future reversal = $190,000.
Pretax financial income 2018 = $400,000.

a) 2018 taxable income and taxes payable

 Taxable income 2018 = 400,000 – 190,000 = $210,000

 Income taxes payable = 30% × 210,000 = $63,000

b) Deferreds and entry

 DTL at 12/31/2018 = 30% × 190,000 = $57,000 (no opening

deferreds)
 Total income tax expense (2018) = current 63,000 + deferred
57,000 = $120,000

Journal entry (2018):

 Dr Income Tax Expense 120,000

 Cr Deferred Tax Liability 57,000
 Cr Income Taxes Payable 63,000

5) EBITDA & depreciation (tax rate = 40%)

Given: EBITDA = $25m, tax-exempt interest income = $1m, book depreciation = $3m, tax
depreciation = $5m.

Taxable income (tax rules):

Tax starts from EBITDA and allows tax depreciation:
  Taxable income = 25 – 5 = $20m
(Tax-exempt interest is excluded from taxable income.)

Income taxes payable: 40% × 20 = $8m

(Extra insight, not asked: temporary difference from depreciation = $2m (3 vs. 5) → DTL
increase = 40% × 2 = $0.8m.)

If you'd like, I can turn any section into neat journal-entry formats or a one-page study sheet.

Q6 — Hunt Company (tax rate = 40%)

Facts (both years): revenues $900,000; operating expenses $400,000

each year.

In 2019 Hunt accrues a loss & liability of $50,000 for litigation (recognized
for financial reporting in 2019). That $50,000 is not deductible for tax in
2019; it becomes deductible when paid in 2020. This creates a deductible
temporary difference in 2019 (book expense now, tax deduction later) →
Deferred Tax Asset (DTA).

---

a) IFRS (book) vs Tax reporting (taxable) — 2019 and 2020

Book / IFRS (2019)

Revenue = 900,000

Operating expenses = 400,000

Litigation expense (accrual) = 50,000

Pretax book income = 900,000 − 400,000 − 50,000 = 450,000

Book tax (income tax expense at 40%) = 450,000 × 0.40 = 180,000

Net income (book) = 450,000 − 180,000 = 270,000

Tax return (2019)

For tax, the 50,000 is not deductible in 2019, so: taxable income =
900,000 − 400,000 = 500,000

Income taxes payable (current tax) = 500,000 × 0.40 = 200,000

Book / IFRS (2020)

Revenue = 900,000

Operating expenses = 400,000

Litigation accrual was expensed in 2019, so no book expense in 2020 →

Pretax book income = 900,000 − 400,000 = 500,000

Book tax (income tax expense at 40%) = 500,000 × 0.40 = 200,000

Net income (book) = 500,000 − 200,000 = 300,000

Tax return (2020)

In 2020 Hunt pays the litigation (deduction now allowed), so taxable
income = 900,000 − 400,000 − 50,000 = 450,000

Income taxes payable = 450,000 × 0.40 = 180,000

---

b) Deferred Tax Asset — end of 2019

Temporary difference at 12/31/2019 = book expense recognized now but

deductible later = 50,000.

DTA = 50,000 × 40% = $20,000.

(So DTA at 12/31/2019 = $20,000.)

---

c) Compute & record income tax expense for 2019

Calculations (digit-by-digit):

Pretax book income = 450,000 → book tax = 450,000 × 0.40 = 180,000.

Current tax (taxable income 500,000) = 500,000 × 0.40 = 200,000.

Change in deferred tax (DTA increase) = +20,000 (0 → 20,000). That

increase is a deferred tax benefit (reduces tax expense).
Income tax expense (book) = current tax − increase in DTA = 200,000 −
20,000 = 180,000 (same as 450,000 × 0.40).

Journal entries (two-step, clear):

1. Record current tax payable for 2019:

Dr Income Tax Expense 200,000

Cr Income Taxes Payable 200,000

2. Recognize deferred tax asset (tax benefit from future deductible

difference):

Dr Deferred Tax Asset 20,000

Cr Income Tax Expense 20,000

Net effect: Income Tax Expense recognized = 200,000 − 20,000 =

180,000; Income Taxes Payable = 200,000; DTA = 20,000.

(You may combine into one entry if you prefer:

Dr Income Tax Expense 180,000

Dr Deferred Tax Asset 20,000

Cr Income Taxes Payable 200,000

```)
---

## d) **Compute & record income tax expense for 2020**

**Calculations (digit-by-digit):**

- Pretax book income = 500,000 → book tax = 500,000 × 0.40 =

**200,000**.

- Current tax (taxable income 450,000) = 450,000 × 0.40 = **180,000**.

- Change in deferred tax: DTA goes from 20,000 → 0 as the deduction is

taken in 2020, so **DTA decreases by 20,000**. That decrease is a
**deferred tax expense** (increases tax expense this year).

- Income tax expense (book) = current tax + decrease in DTA = 180,000

+ 20,000 = **200,000** (same as 500,000 × 0.40).

**Journal entries (two-step):**

1. Record current tax payable for 2020:

Dr Income Tax Expense 180,000 Cr Income Taxes Payable

180,000

2. Reverse the deferred tax asset (recognize deferred tax expense

because DTA used):

Dr Income Tax Expense 20,000 Cr Deferred Tax Asset 20,000

Net: Income Tax Expense = 180,000 + 20,000 = **200,000**; Income

Taxes Payable = **180,000**; Deferred Tax Asset = **0**.

(Combined entry possible:

Dr Income Tax Expense 200,000 Cr Income Taxes Payable
180,000 Cr Deferred Tax Asset 20,000

---

## e) **Record entry at end of 2020 (settlement of litigation & paying

taxes)**

1. To record payment of the litigation liability (the liability that was

accrued in 2019):

Dr Litigation Liability 50,000 Cr Cash 50,000

(This removes the liability that had been recognized in 2019. The tax
effect of the cash payment is already handled through the deferred tax
reversal recorded above.)

2. If the company actually **pays** the 2019 income taxes payable

(200,000) during 2020, record:

Dr Income Taxes Payable 200,000 Cr Cash 200,000

(And when the 2020 tax is paid, similarly debit Income Taxes Payable
180,000 and credit Cash.)

---

# Q7 — **Groh Inc.**: NOL carry-back / carry-forward (no

temporary/permanent differences)

Given:
- 2011 taxable income = 50,000 ; tax rate 35% ; tax paid 17,500

- 2012 taxable income =100,000 ; tax rate 30% ; tax paid 30,000

- 2013 taxable income =200,000 ; tax rate 40% ; tax paid 80,000

- 2014 taxable **loss** = (500,000) → net operating loss (NOL) of 500,000

Assume NOL can be carried back to *prior* years (apply to the most
recent taxable year first: 2013 → 2012 → 2011).

---

## 1) **Compute & record income-tax refund receivable (carry-back)**

Apply NOL to prior years in reverse chronological order:

- Apply to **2013**: taxable income 200,000 at 40% → tax refund =

200,000 × 0.40 = **80,000**

Remaining NOL = 500,000 − 200,000 = **300,000**

- Apply to **2012**: taxable income 100,000 at 30% → tax refund =

100,000 × 0.30 = **30,000**

Remaining NOL = 300,000 − 100,000 = **200,000**

- Apply to **2011**: taxable income 50,000 at 35% → tax refund = 50,000

× 0.35 = **17,500**

Remaining NOL = 200,000 − 50,000 = **150,000**

**Total refund receivable = 80,000 + 30,000 + 17,500 = \$127,500.**

**Journal to record the refund receivable in 2014 (loss year):**

Dr Income Tax Refund Receivable 127,500 Cr Income Tax Benefit (or
Income Tax Expense reduction) 127,500

(If refunds are to be offset against previously paid tax payables in the
prior years, the prior years’ payable would be reversed and cash refunded
— the net effect in 2014 is a receivable and recognition of tax benefit.)

---

## 2) **Compute & record deferred tax asset for carry-forward**

After carrying back 350,000 of the 500,000 (200k + 100k + 50k),

remaining NOL = **150,000** to carry forward.

Assume enacted future tax rate = **40%**.

DTA for carryforward = 150,000 × 0.40 = **60,000**.

**Journal to record the DTA in 2014:**

Dr Deferred Tax Asset 60,000 Cr Income Tax Benefit (or Income

Tax Expense reduction) 60,000

**Combined tax benefit recognized in 2014 (loss year)** = refund

receivable 127,500 + DTA 60,000 = **187,500** (reduces the NOL impact
on the 2014 income statement as a tax benefit).

---

# (Optional) Q8 — quick (if you want): **XYZ Company** NOL \$40 million
in 2017; prior taxable incomes: 2016 \$5m, 2015 \$10m; tax rate 40% for
all years.
Apply NOL to 2016 first, then 2015:

- 2016: 5m × 40% = **2.0m** refund; remaining NOL = 35m

- 2015: 10m × 40% = **4.0m** refund; remaining NOL = 25m carried

forward

**Income-tax refund receivable = 2.0m + 4.0m = 6.0m.**

**Remaining carryforward DTA = 25m × 40% = 10.0m** (if enacted future

rate 40% and realizable).

---

If you want, I can:

- Format these into neat one-page journal schedules you can hand in, or

- Produce the T-accounts / DTL/DTA rollforward schedules, or

- Convert everything into a single combined set of journal entries for each
company and year.

Which of those would you like next?