This case study will allow students to apply the concepts covered in Weeks 1 and 2. The assignment will assess the skills of the student in computing, recording and reporting deferred taxes, and measuring and recording pension expense.

  • Read the scenario below
  • Complete requirements 1 to 7 for Case Study Part A and requirements 1 and 2 for Case Study Part B in Excel.
  • Please submit your solution to the case as a Voice Thread with at least a 2-minute narration summarizing your findings.
  • Do not make it available to the class.

Instructions for Creating Voice Thread are available on the course navigation menu under Voice Thread.

Case Study Part A Scenario

SuperSports Inc.reported pretax financial income of $260,000 for the year 2016. Taxable income of SuperSports is however different from its pretax financial income because of the items given below.

  • Depreciation deducted on the tax return is $40,000 greater than the depreciation charged on Income Statement.
  • Estimated Warranties Expenses charged to Income Statement is $30,000 but Warranties expenses deductible on tax return are $20,000
  • $3,200 appear in the income statement of SuperSports as Fines and penalties paid.
  • SuperSports received $ 6,000 interest from Tax Saving Municipal Bonds.

Enacted Tax Rate for the year 2016 is 30% and for 2017 is 35%

Required: For the year 2016, SuperSports Inc. requests you to:

  1. Identify items of permanent and temporary difference from the information given
  2. What items of temporary difference result in future taxable amounts and what items will result in future deductible amounts
  3. Compute Taxable Income
  4. Compute current income tax expense/Tax payable
  5. Compute deferred taxes ( Deferred Tax Liability and Deferred Tax Asset)
  6. Record journal entry for Income Tax Expense
  7. Show how deferred taxes will be reported in the Balance Sheet.

Case Study Part B

SuperSports provides you the following pension data for the year 2016.

Item Service Cost, 2016$248,000Projected Benefit Obligation, January 2016$340,000Plan assets (fair value), Januray 1, 2016$360,000Prior Service Cost – AOCI (2016 amoritization, $25,000)$250,000Net Loss – AOCI (2016 amoritization, $10,000)$110,000Actual Return on Plan Assets$45,000Interest rate and expected return on plan assets10%Contributions made to plan assets during 2016$175,000

SuperSports requests you to:

  1. Compute pension expense for the year 2016
  2. Record 2016 journal entry for pension expense