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ASC 740 Tax Provision Case Bear Down, Inc. (BDI)

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Added on  2019-10-09

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Accounting 556 – University of ArizonaASC 740 Tax Provision CaseBear Down, Inc. (BDI)ObjectiveAt the end of this exercise the participants will be able toUnderstand what information needs to be gathered from the client to complete the entire tax provision. Understand the importance of involvement of joint planning by both the Audit and Tax function in the provision preparation process.Given a balance sheet, trial balance (included in the Excel workbook), and other selected financial information, identify additional information needed from the company. Calculate the income tax payable, the deferred tax asset and liability balances, and the current and deferred tax expense, record the necessary journal entry, prepare the tax rate reconciliation, and complete the Company’s tax account roll-forward analysis (i.e., beginning tax account balances to ending tax account balances).BackgroundFollowing is a balance sheet and other miscellaneous information for Bear Down, Inc. (BDI) for the year ended December 31, 20X3. The controller has asked you to assist in the preparation of the tax provision. You have received a draft copy of the financial statement without final tax numbers. Using the limited information below and whatever additional information you are able to obtain, compute the current year tax accrual and provision so that a final auditadjustment can be made prior to the Company’s earnings release next week.Balance SheetDecember 31, 20X3Cash$1,392,017Accounts payable$1,267,565Accounts receivable (net)907,079Current notes payable269,721Inventory1,099,510Deferred revenue188,000Investment in securitiesDeferred tax asset3,392,994 18,626Income tax payableAccrued liabilities262,000 1,252,537Land and property—net925,000Long-term debt 1,841,898Investment in subsidiary100,000Long-term note receivable150,000Other assets354,069Equity & retained earnings 3,257,574Total assets$8,339,295Total liabilities & equity$8,339,295
ASC 740 Tax Provision Case Bear Down, Inc. (BDI)_1

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