the purpose of income smoothing. Thus, rather than years of exceptionally good or bad earnings, companies will try to keep the figures relatively stable by adding and removing cash from reserve accounts. One of the good earnings management activities is describe as income smoothing. It is involve that management taking actions to try to create stable financial performance by acceptable, voluntary business decisions in the context of competition and market developments. Income smoothing can
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3 years of operations, Lee reported net income and declared dividends as follows: | Net income | Dividends declared | 2004 | $ 40,000 | $ –0– | 2005 | 125,000 | 50,000 | 2006 | 160,000 | 50,000 | o The following information relates to 2007: Income before income tax: $240,000 Prior period adjustment: understatement of 2005 depreciation expense (before taxes): $ 25,000 Cumulative decrease in income from change in inventory methods (before
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Norman Corporation (A)* Until 2006, Norman Corporation, a young manufacturing of specialty products, had not had its financial statements audited. It had, however, relied on the auditing firm of Kline & Burrows to prepare its income tax returns. Because it was considering borrowing on a long-term note and the lender surely would require audited statements, Norman decided to have its 2006 financial statements attested by Kline & Burrows. Kline & Burrows assigned Jennifer Warshaw to
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1. Decompose IBM’s ROE and discuss the factors (and trends) that contribute to Big Blue’s profitability? Answer: Return over equity is a percentage of Net income to shareholder’s equity. ROE = Net Income/Shareholder's Equity In 1996 ROE = 5,864/21,638 =27.11% In 1997 ROE = 6,093/19,951 = 30.53% In 1998 ROE = 6,328/20,109 = 31.46% In 1999 ROE = 7,712/19,756 = 39.03% Factors that contribute to the Big Blue’s profitability are the revenues, Cash
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reorganization of C corporations. However, unlike a C corporation, an S corporation is a flow-through entity and shares many tax similarities with partnerships. For example, basis calculations for S corporation shareholders and partners are similar, the income or loss of an S corporation flows through to its owners, and distributions are generally not taxed to the extent of the owner’s basis. 2. [LO 1] What are the limitations on the number and type of shareholders an S corporation may have? How
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Tax > NZ Income Tax Law and Practice (revised edition) > CONCEPTS OF INCOME > [¶40-010] The concept of income [¶40-010] The concept of income Click to open document in a browser Last reviewed: 27 June 2011 Income tax is imposed by s BB 1 of the Income Tax Act 2007. The courts recognise that it is the Act itself which imposes the liability for income tax. The Commissioner acts in quantification of the amount due. These propositions are outlined at ¶10-500. The determination of a taxpayer’s income
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involved in directing production and business). * Efficiency bonuses for employees: 50 * Personal income tax payable: 150; VAT payable according to credit-invoice method: 250. * Other expenses are deductible. c. Other incomes: * Income from domestic contribution of equity capital to company B; enterprise A receives its share of income before company B pays CIT: 200. * Income from selling a machine with the price of 300, the remaining value of the machine is 20, the transfer expense
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Furthermore, as customers have a certain amount of income, price of the good increases, customers’ preference have to change to corresponding bundles. When price goes up, consumers have to decrease quantities purchasing, therefore their satisfaction level goes down by 1098.48 units. Moreover, instead of imposing a 1% excise tax, government could generate the same amount of tax revenue by imposing an income tax on customers. Comparing imposing income tax and excise tax, we know that
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ACCOUNTING FOR INCOME TAX Aylin Alishahi University of Houston - Victoria Abstract The main idea of this paper is to introduce the concept of Accounting for Income Tax. As part of our discussion, we will understand the meaning of Income Tax and Tax Accounting. We will also look into the different terminologies of GAAP and IRS and the differences between the two. There are two basic kinds of differences between the two – temporary and permanent. In addition to looking at the basic kinds of differences
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1. Income Statement 2. Format of the Income Statement 3. Reporting Irregular Items 4. Special Reporting Issues 1. Income Statement a. Usefulness • Evaluate past performance • Predicting future performance • Help assess the risk or uncertainty of achieving future cash flows b. Limitations • Companies omit items that cannot be measured reliably • Income is affected by the accounting methods employed • Income measurement
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