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1、,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.Accounting for Investment in Stocks 7.Business Combinations 8.Financial Analysis and Interpretation,Chapter F12,C12,Corporat
2、ions: Income and Taxes, Stockholders Equity, Investments in Stocks,Corporate Income Taxes Unusual Income Statement Items Earnings Per Common Share Reporting Stockholders Equity Long-Term Stock Investments Business Combinations Price-Earnings Ratio,Slide #Power Note Topics,3 10 16 22 28 3638,Note: To
3、 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 are taxable entities that must pay income taxes. Because income tax is often a significant amount, it is reported
4、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 create some temporary differences that reverse in later years. Temporary differences do not change or reduce the total
5、 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 reporting methods.,Point-of-Sale Method,Installment Method,Financial Reporting,Tax Reporting,Example: Cash collecte
6、d in advance.,When Earned,When Collected,Revenue Reporting,Temporary Differences in Reporting Expenses,Deduct NowDeduct Later Deduct SlowerDeduct Faster,Example: Product warranty expense.,When Estimated,When Paid,Financial Reporting,Tax Reporting,Example: Methods of depreciation.,Straight-Line Metho
7、d,MACRS Method,Expense Deductions,DateDescriptionDebitCredit,Income Tax Accounting,Income Tax Expense120,000 Income Tax Payable40,000 Deferred Income Tax Payable80,000 Deferred Income Tax Payable 48,000 Income Tax Payable 48,000,1st Yr.,Income tax allocation due to timing differences.,Financial repo
8、rting 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.,DateDescriptionDebitCredit,Income Tax Accounting,Financial reporting and tax reporting summary: Income before tax$300,000 x
9、 40% rate = $120,000 Taxable income $100,000 x 40% rate = $40,000,Income Tax Expense120,000 Income Tax Payable40,000 Deferred Income Tax Payable80,000,The income tax expense is deducted from the income before tax reported on the income statement.,1st Yr.,DateDescriptionDebitCredit,Income Tax Account
10、ing,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 Expense120,000 Income Tax Payable40,000 Deferred Income Tax Payable80,000,The income tax payable is based on the taxable income and is a current
11、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 $100,000 x 40% rate = $40,000,Income Tax Expense120,000 Income Tax Payable40,000 Deferred Income Tax Payab
12、le80,000,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 unusual items are: 1. Results of discontinued operations. 2.Extraordinary items of gain or loss. 3.A change fro
13、m 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 Year Ended December 31, 2003,Net sales$9,600,000 Income from continuing operations before income tax$1,310,000 I
14、ncome tax620,000 Income from continuing operations$ 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 $65,00015
15、0,000 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$9,600,000 Income from continuing operations before income tax$1,310,000 Income tax620,000 Income from
16、continuing operations$ 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 CorporationIncome StatementFor the Year Ended Decembe
