During Its First Year of Operations,Keen Corp

question 70

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 was not deductible for tax purposes.
• No other items affected deferred tax amounts besides these transactions.
Required:
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:

Company's Costs

Company's costs refer to the various expenses a company incurs in its operations, including production, marketing, and administrative expenses.

Level of Sales

This term refers to the total volume or value of sales achieved by a company, product, or service over a specific period, indicating its market performance.

Variable Costs

Expenses that change in proportion to the activity or volume of production in a business, such as materials and labor.

Breakeven Analysis

Breakeven Analysis is a financial calculation to determine the point at which revenues equal costs, indicating no profit or loss.