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    Big Deal Vs Small

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    spectrum_48
    Big-Deal Construction Company specialized in building dams over 5 years. They completed 3 dams, with the first finishing in Year 3 at a $240,000 profit, the second in Year 4 at $252,000 profit, and the third in Year 5 at $300,000 profit. The company uses percentage-of-completion accounting for financial reporting and completed-contract accounting for tax purposes. A table shows the company's book income was $396,000 over the 5 years, but its taxable income was only $261,000, resulting in a $135,000 difference.

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    Big Deal Vs Small

    Uploaded by

    spectrum_48
    264 views2 pages
    Big-Deal Construction Company specialized in building dams over 5 years. They completed 3 dams, with the first finishing in Year 3 at a $240,000 profit, the second in Year 4 at $252,000 profit, and the third in Year 5 at $300,000 profit. The company uses percentage-of-completion accounting for financial reporting and completed-contract accounting for tax purposes. A table shows the company's book income was $396,000 over the 5 years, but its taxable income was only $261,000, resulting in a $135,000 difference.

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    Big Deal vs Small

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    Big-Deal Construction Company specialized in building dams over 5 years. They completed 3 dams, with the first finishing in Year 3 at a $240,000 profit, the second in Year 4 at $252,000 profit, and the third in Year 5 at $300,000 profit. The company uses percentage-of-completion accounting for financial reporting and completed-contract accounting for tax purposes. A table shows the company's book income was $396,000 over the 5 years, but its taxable income was only $261,000, resulting in a $135,000 difference.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    264 views2 pages

    Big Deal Vs Small

    Uploaded by

    spectrum_48
    Big-Deal Construction Company specialized in building dams over 5 years. They completed 3 dams, with the first finishing in Year 3 at a $240,000 profit, the second in Year 4 at $252,000 profit, and the third in Year 5 at $300,000 profit. The company uses percentage-of-completion accounting for financial reporting and completed-contract accounting for tax purposes. A table shows the company's book income was $396,000 over the 5 years, but its taxable income was only $261,000, resulting in a $135,000 difference.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 2

    Big-Deal Construction Company specializes in building dams. During Years 3, 4, and 5, three dams were completed.

    The first dam was


    started in Year 1 and completed in Year 3 at a profit before income taxes of $240,000. The second and third dams were started in Year 2.
    The second dam was completed in Year 4 at a profit before income taxes of $252,000, and the third dam was completed in Year 5 at a
    profit before income taxes of $300,000. The company uses percentage-of-completion accounting for financial reporting and the
    completed-contract method of accounting for income tax purposes. The applicable income tax rate is 50% for each of the Years 1
    through 5. Create a table outlining the year 1-5 numbers. One with total book income, one with total taxable income, and then show the
    difference between the two.

    Dam
    1
    2
    3

    Y1

    Y2

    Y3

    20%

    60%

    20%

    30%

    60%

    10%

    10%

    30%

    50%

    (a) Finacial reporting (book) income


    Y1
    Dam
    Book Income
    $ 24,000
    1
    Book Income
    2
    Book Income
    3
    Total Income (p)
    $24,000
    (b) Taxable Income
    Taxable Income
    Taxable Income
    Taxable Income
    Total TI (q)
    Income after Tax
    (d=p-r)

    Y2
    $ 72,000
    $ 37,800
    $ 15,000
    $124,800

    Y4

    Y3
    Y4
    $ 24,000
    $ 75,600 $ 12,600
    $ 45,000 $ 75,000
    $144,600 $ 87,600

    $ 120,000

    1
    2
    3

    $ 126,000
    $

    $120,000

    $ 24,000 $ 124,800 $

    24,600

    $126,000
    $ (38,400)

    ompleted. The first dam was


    d dams were started in Year 2.
    as completed in Year 5 at a
    ial reporting and the
    for each of the Years 1
    e income, and then show the

    Y5

    10%

    Y5

    Total
    $120,000
    $126,000
    $ 15,000 $150,000
    $ 15,000 $396,000

    $120,000
    $126,000
    $ 150,000 $150,000
    $150,000 $396,000
    $(135,000)

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