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1、Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,C12-,*,Learning Objectives,Power Notes,1.Corporate Income Taxes,2.Unusual Income Statement Items,3.Earnings Per Common Share,4.Reporting Stockholders Equity,5.Comprehensive Income,6.Ac

2、counting for Investment in Stocks,7.Business Combinations,8.Financial Analysis and Interpretation,Chapter F12,C12,Corporations:Income and Taxes,Stockholders Equity,Investments in Stocks,Corporate Income Taxes,Unusual Income Statement Items,Earnings Per Common Share,Reporting Stockholders Equity,Long

3、-Term Stock Investments,Business Combinations,Price-Earnings Ratio,Slide#Power Note Topics,3,10,16,22,28,3638,Note:,To select a topic,type the slide#and press Enter.,Power Notes,Chapter F12,Corporations:Income and Taxes,Stockholders Equity,Investments in Stocks,Corporate Income Taxes,Corporations ar

4、e,taxable entities,that must pay income taxes.,Because income tax is often a,significant amount,it is reported as a,special deduction,.,Taxable income,is determined according to,tax laws,which are often different from,income before income tax,according to,GAAP,.,Differences in tax law and GAAP creat

5、e some,temporary differences,that reverse in later years.,Temporary differences,do not change or reduce the total amount of tax paid,they affect only the timing of when the taxes are paid.,Temporary Differences in Reporting Revenues,Report NowTaxable Later,Report LaterTaxable Now,Example:,Income rep

6、orting methods.,Point-of-Sale Method,Installment Method,Financial,Reporting,Tax,Reporting,Example:,Cash collected in advance.,When,Earned,When,Collected,Revenue,Reporting,Temporary Differences in Reporting Expenses,Deduct NowDeduct Later,Deduct SlowerDeduct Faster,Example:,Product warranty expense.,

7、When,Estimated,When,Paid,Financial,Reporting,Tax,Reporting,Example:,Methods,of depreciation.,Straight-Line,Method,MACRS,Method,Expense,Deductions,DateDescriptionDebitCredit,Income Tax Accounting,Income Tax Expense,120,000,Income Tax Payable,40,000,Deferred Income Tax Payable80,000,Deferred Income Ta

8、x Payable 48,000,Income Tax Payable 48,000,1st Yr.,Income tax allocation due to timing differences.,Financial reporting and tax reporting summary:,Income before tax,$300,000 x 40%rate=$120,000,Taxable income,$100,000 x 40%rate,=,$40,000,Record$48,000 of deferred tax as payable.,2nd Yr.,DateDescripti

9、onDebitCredit,Income Tax Accounting,Financial reporting and tax reporting summary:,Income before tax,$300,000 x 40%rate=$120,000,Taxable income,$100,000 x 40%rate,=,$40,000,Income Tax Expense,120,000,Income Tax Payable,40,000,Deferred Income Tax Payable80,000,The,income tax expense,is deducted from

10、the,income before tax,reported on the income statement.,1st Yr.,DateDescriptionDebitCredit,Income Tax Accounting,Financial reporting and tax reporting summary:,Income before tax,$300,000 x 40%rate=$120,000,Taxable income,$100,000 x 40%rate,=,$40,000,Income Tax Expense,120,000,Income Tax Payable,40,0

11、00,Deferred Income Tax Payable80,000,The,income tax payable,is based on the taxable income and is a current liability due and payable.,1st Yr.,DateDescriptionDebitCredit,Income Tax Accounting,Financial reporting and tax reporting summary:,Income before tax,$300,000 x 40%rate=$120,000,Taxable income,

12、$100,000 x 40%rate,=,$40,000,Income Tax Expense,120,000,Income Tax Payable,40,000,Deferred Income Tax Payable80,000,The,deferred income tax payable,is a,deferred liability,due later as the,timing differences,reverse and the taxes become due.,1st Yr.,Unusual Income Statement Items,Three types of,unus

13、ual items,are:,1.Results of,discontinued operations,.,2.,Extraordinary items,of gain or loss.,3.A,change,from one,generally accepted accounting principle to another,.,These items and the,related tax effects,are,reported separately,in the income statement.,Jones CorporationIncome StatementFor the Yea

14、r Ended December 31,2003,Net sales$9,600,000,Income from continuing operations,before income tax$1,310,000,Income tax620,000,Income from continuing operations$690,000,Loss on discontinued operations(Note A)100,000,Income before extraordinary items and cumulative,effect of a change in accounting prin

15、ciple$590,000,Extraordinary item:,Gain on condemnation of land,net of,applicable income tax of$65,000150,000,Cumulative effect on prior years of changing to,different depreciation method(Note B)92,000,Net income$832,000,Jones CorporationIncome StatementFor the Year Ended December 31,2003,Net sales$9

16、,600,000,Income from continuing operations,before income tax$1,310,000,Income tax620,000,Income from continuing operations$690,000,Loss on discontinued operations(Note A)100,000,Income before extraordinary items and cumulative,effect of a change in accounting principle$590,000,Extraordinary item:,Gain on condemnation of land,net of,applicable income tax of$65,000150,000,Cumulative effect on prior years of changing to,different depreciation method(Note B)92,000,Net income$832,000,Jones Corporatio