Complete requirements 1 to 7 for Case Study Part A and requirements 1 and 2 for Case Study Part B in Excel.
Please submit your solution to the case as a multimedia piece with at least a 2-minute narration summarizing your findings.
Case Study Part A
SCENARIO
SuperSports Inc.reported pretax financial income of $260,000 for the year 2016. Taxable income of SuperSports is however different from its pretax financial income because of the items given below.
- Depreciation deducted on the tax return is $40,000 greater than the depreciation charged on Income Statement.
- Estimated Warranties Expenses charged to Income Statement is $30,000 but Warranties expenses deductible on tax return are $20,000
- $3,200 appear in the income statement of SuperSports as Fines and penalties paid.
- SuperSports received $ 6,000 interest from Tax Saving Municipal Bonds.
Enacted Tax Rate for the year 2016 is 30% and for 2017 is 35%
Required: For the year 2016, SuperSports Inc. requests you to:
- Identify items of permanent and temporary difference from the information given
- What items of temporary difference result in future taxable amounts and what items will result in future deductible amounts
- Compute Taxable Income
- Compute current income tax expense/Tax payable
- Compute deferred taxes ( Deferred Tax Liability and Deferred Tax Asset)
- Record journal entry for Income Tax Expense
- Show how deferred taxes will be reported in the Balance Sheet.
Case Study Part B
SuperSports provides you the following pension data for the year 2016.
| Item | |
|---|---|
| Service Cost, 2016 | $248,000 |
| Projected Benefit Obligation, January 2016 | $340,000 |
| Plan assets (fair value), Januray 1, 2016 | $360,000 |
| Prior Service Cost – AOCI (2016 amoritization, $25,000) | $250,000 |
| Net Loss – AOCI (2016 amoritization, $10,000) | $110,000 |
| Actual Return on Plan Assets | $45,000 |
| Interest rate and expected return on plan assets | 10% |
| Contributions made to plan assets during 2016 |
$175,000 |
SuperSports requests you to:
- Compute pension expense for the year 2016
- Record 2016 journal entry for pension expense
Grading Rubrics
CASE STUDY PART A
| Requirement | Description | Points |
|---|---|---|
| 1 | Correct identification of all items permanent and temporary difference | 12 |
| 2 | Correct determination of future taxable and future deductible items | 6 |
| 3 | Computation of correct Taxable Income | 20 |
| 4 | Computation of correct Income Tax Payable/ Current Income Tax Expense | 10 |
| 5 | Correct computation of deferred taxes | 10 |
| 6 | Correct journal entry with correct debit/credit and correct account names and amount | 10 |
| 7 | Correct classification of deferred taxes for balance sheet purpose | 7 |
CASE STUDY PART B
| Requirement | Description | Points |
|---|---|---|
| 1 | Computation of correct pension expense amount | 15 |
| 2 | Correct journal entry with correct debit/credit and correct account names and amount | 10 |
| TOTAL POINTS POSSIBLE | 100 |
Jermaine Byrant
Nicole Johnson
OVER
RATING
YEARS
