The Following Information Is Available for the First Three Years

question 73

Essay

The following information is available for the first three years of operations for Cooper Company: 3. On January 2, 2015, $300,000 was collected in advance for rental of a building for a three-year period. The entire $300,000 was reported as taxable income in 2015, but $200,000 of the $300,000 was reported as unearned revenue at December 31, 2015 for book purposes."4. The enacted tax rates are 40% for all years.
Instructions
(a) Prepare a schedule comparing depreciation for financial reporting and tax purposes.
(b) Determine the deferred tax (asset) or liability at the end of 2014.
(c) Prepare a schedule of future taxable and (deductible) amounts at the end of 2015.(d) Prepare a schedule of the deferred tax (asset) and liability at the end of 2015.(e) Compute the net deferred tax expense (benefit) for 2015.(f) Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2015."

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Definitions:

Leverage

In finance, leverage refers to the use of borrowed funds or debt to amplify potential returns on investment.

Optimal Structure

The most efficiently arranged composition of an entity or process to maximize performance or outcomes, often used in the context of financial capital structure or organizational design.

Operating Leverage

A measure of how revenue growth translates into an increase in operating income, indicating the extent to which a company can increase profitability by increasing sales.

Financial Leverage

The use of borrowed funds in an attempt to increase the returns to equity.