Module 9 Assignment: Current and Deferred Tax, Temporary Differences, and Tax Planning Strategies

For this assignment, you will apply the concepts learned in Module 9 to recognize and measure current tax liabilities, account for deferred tax assets and liabilities, identify and account for temporary differences, and develop ethical tax planning strategies. You will perform calculations, journal entries, and analysis to demonstrate your understanding of these topics. You can continue using the accounting simulator from our website, MS Excel, or an inexpensive accounting software if you have access to it.

Assignment Tasks

1. Current Tax Liabilities:
   • Calculate the current tax expense using the provided financial data and prepare the journal entry for the current tax liability.
     • Taxable Income: $120,000
     • Tax Rate: 25%
   • Briefly explain the process for recognizing and measuring current tax liabilities.
2. Deferred Tax Assets and Liabilities:
   • Identify the temporary differences and calculate the deferred tax asset or liability for the following items:
     • Allowance for Doubtful Accounts: $8,000 (Deductible Temporary Difference)
     • Accelerated Depreciation: $15,000 (Taxable Temporary Difference)
     • Tax Rate: 30%
   • Prepare the journal entries for the recognition of the deferred tax asset and deferred tax liability.
   • Briefly explain the impact of deferred tax assets and liabilities on the financial statements.
3. Temporary Differences:
   • Identify and account for the following temporary differences:
     • Revenue recognized for accounting purposes but deferred for tax purposes: $10,000
     • Warranty costs accrued for accounting purposes but not deductible for tax purposes: $5,000
   • Calculate the deferred tax asset or liability for each temporary difference using a tax rate of 25%.
   • Prepare the journal entries to record the deferred tax assets and liabilities.
   • Analyze the impact of these temporary differences on the company’s financial position.
4. Tax Planning Strategies:
   • Develop a tax planning strategy for the company to minimize its tax liability using at least two of the following methods:
     • Tax Deductions
     • Tax Credits
     • Income Deferral
     • Income Splitting
     • Utilizing Tax-Advantaged Accounts
   • Discuss the ethical considerations in implementing these tax planning strategies.
   • Provide examples of ethical and unethical tax planning practices.

Submission Instructions

Compile your calculations, journal entries, analysis, and tax planning strategy into a single document. Submit your document in PDF format via the course submission portal.

Additional Activities

• Discussion Post: Share your experience in the course forum, detailing any challenges you faced during the assignment and how you overcame them. Provide feedback on your classmates’ posts.
• Peer Review: Review at least two of your classmates’ submissions and provide constructive feedback. Focus on the calculations’ accuracy, the journal entries’ clarity, and the ethical considerations in the tax planning strategies.

Due Date: One week after completing this module.

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