During Its First Year of Operations,Keen Corp

question 45

Essay

During its first year of operations,Keen Corp.reported the following information:
• Income before income taxes for the year was $650,000 and the tax rate was 25%.
• Depreciation expense was $200,000 and CCA was $100,000.The carrying amount of property,plant,and equipment at the end of the year was $720,000,while UCC was $820,000.
• Warranty expense was reported at $110,000,while actual cash paid out was $60,000.
• $15,000 of expenses included in income were not deductible for tax purposes.
• No other items affected deferred tax amounts besides these transactions.
Requirement:
a.Prepare the journal entries to record income tax expense for the year.
b.Assume Keen reported a loss instead of income in its first year of operations.Explain what accounting policy choices are available to Keen to record the tax implications of the loss,and provide a recommendation.

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Definitions:

Staircase Analysis

A method used to break down and examine the incremental progress or development in a series of stages or steps.

Sales Forecasts

Projections of the amount of a product or service that will be sold in a future period, based on historical data, market trends, and other factors.

Marketing Mix

The combination of different marketing elements used by a business to meet its targets within a given market, emphasizing the importance of adjusting these elements to achieve marketing objectives.

Effective Sales

The achievement of sales goals in an efficient manner with a focus on maximizing customer satisfaction and profitability.