Intermediate Accounting Volume 2 Canadian 7Th Edition Beechy Solutions Manual Full Chapter PDF

Intermediate Accounting Volume 2
Canadian 7th Edition Beechy Solutions

Manual
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Chapter 17: Accounting for Tax Losses
Suggested Time
Case 17-1 Water Tours Ltd
17-2 Soccer Inc.
17-3 Downhill Ski Co.
Technical Review
TR17-1 Loss Carryback..................................................... 5
TR17-2 Loss Carryback/Carryforward .............................. 5
TR17-3 Loss Carryback/Carryforward, Change in Rate ... 10
TR17-4 Loss Carryback/Carryforward,
Temporary Differences ..................................... 10
TR17-5 Loss Carryback/Carryforward, Refile CCA ......... 10
TR17-6 Loss Carryback/Carryforward, Refile CCA ......... 15
TR17-7 Benefits of Carryback and Carryforward ........... 15
TR17-8 Deferred Income tax LCF Asset;Table .............. 5
TR17-9 LCF Use, Change in Rate .................................. 15
TR17-10 LCF Use, Change in Rate .................................... 10
Assignment
A17-1 Income Tax Explanation .................................... 30
A17-2 Probable Test ....................................................... 15
A17-3 Loss Carryback/Carryforward .............................. 20
A17-4 Loss Carryback; Entries and Reporting ............... 15
A17-5 Recognition of Loss Carryforward ....................... 30
A17-6 Calculate a Loss Carryback and Its Benefit;
Temporary Differences (*W) ....................... 15
A17-7 Recording Temporary Differences; Loss; Rate
Change (*W) ................................................ 20
A17-8 Calculate a Loss Carryback and Its Benefit;
Temporary Differences ............................... 20
A17-9 Loss Carryforward; Temporary Difference .......... 30
A17-10 Loss Carrybacks and Loss Carryforwards;
Rate Change ................................................. 30
A17-11 Deferred Tax Asset Revaluation; Rate Change ... 20
A17-12 Loss Carryback/Carryforward; Temporary Difference 30
A17-13 Loss Carryback/Carryforward .............................. 30
A17-14 Loss Carryback/Carryforward; Refiling;Entries .. 40
A17-15 Loss Carryback/Carryforward; Refile; Rate Change 40
A17-16 Loss Carryforward; Temporary Differences;
Rate Change; Entries (*W) .......................... 40
A17-17 Loss Carryback/Carryforward; Temporary
Differences; Rate Change ............................ 50
© 2017 McGraw-Hill Education Ltd. All rights reserved.

Solutions Manual to accompany Intermediate Accounting, Volume 2, 7th edition 17-1
Differences; Rate Change ............................ 50
A17-19 Loss Carryback/Carryforward; Rate Change;
Comprehensive ............................................ 50
Differences; Use in Subsequent Year .......... 30
A17-21 Loss Carryback/Carryforward; Comprehensive;
Rate Change ................................................. 60
A17-22 Tax Losses; Intraperiod Allocation; Income
Statement (*W) ................................................ 30
A17-23 Explain Impact of Temporary Differences; Tax
Losses ........................................................... 30
A17-24 Tax Losses; Temporary Differences .................... 40
A17-25 Tax Losses; Temporary Differences (ASPE) ....... 20
A17-26 Tax Losses; Temporary Differences (ASPE) ....... 20
A17-27 Loss Carryforward; Valuation Allowance (App) . 25
A17-28 Loss Carryback/Carryforward; Valuation
Allowance (App)……………………………….. 20
*W The solution to this assignment is on the text website, Connect.

The solution is marked WEB.

17-2 Solutions Manual to accompany Intermediate Accounting, Volume 2, 7th edition
Cases
Case 17-1 Water Tours Limited
Overview
Water Tours Limited (WTL) is federally incorporated, and privately owned. (Private
ownership is assumed; if the company were public, and audit would have been required
before the current year.) The company has been profitable in the past, but has suffered
recent severe losses. The company had marginal losses from operating activities this year;
positive earnings are the result of an insurance claim. Creditors are anxious, and have
asked for an audit. Ethical choices are important in this risky environment. Improving net
income and showing financial stability are obvious reporting objectives.
Issues
Accounting policy must be considered for:

1. Revenue recognition
2. Expense recognition
3. Redecoration costs
4. Storm damage - unusual gain
5. Income tax accounting
6. Related party transactions
7. Accounting changes
Analysis and Recommendations
1. Revenue recognition
Under the contract basis of revenue recognition, revenue is recognized when there is a
contract with customers, the contract price is set, and performance obligations are
established and satisfied. For WTL, the contract and contract price would presumably
have been established when the customer books in advance. The performance
obligation is for WTC to provide the cruise trip, which involves accommodation, food
and beverages. This performance obligation is satisfied when the cruise takes place.
Revenue is now recognized when cash is received, which is for the most part well in
advance of the cruise date. This may meet management objectives of improving net
income, and it certainly reflects cash flow. However, this revenue recognition point
does not reflect the time at which performance obligations are met.
Some may suggest that revenue should be recognized for non-refundable bookings
when the window for refunds is closed. Again, this does not reflect the period in
which WTL satisfies the performance obligation.

WTL must recognize revenue when the cruise obligation is satisfied, not when cash is
received. This change must be accounted for retrospectively (see #7). This will
increase revenue by $150,000 and net income by $90,000 on 20X3.
2. Expense recognition
Certain advertising expenditures will benefit future periods, but are currently
expensed. Any intangible asset created by the advertising is not severable from WTL,
and thus cannot be recognized. The current accounting policy of expensing
advertising amounts is the appropriate policy.
Reduced rate cruises provided to travel agents from un-sold packages are not
recognized, except to the extent of the amount charged to these individuals. Some
might argue that revenue and promotion expense should both be increased to full fair
value of a cruise trip to reflect the economic activity of WTC for the period. However,
when there is a non-monetary exchange, the fair value of what is given up – the cruise
trip – must be considered. The value of this would appear to be the marginal cost of
food and beverages, since the opportunity cost for the forgone cruise rate is zero.
Accordingly, the current policy of recognizing only the marginal revenue (which
covers the marginal cost) appears to be appropriate.
3. Redecoration costs
Redecoration is an improvement to the ship that is indirectly associated with cash
flows from revenue with customers. These costs should be capitalized and depreciated
over their useful lives (3 or 5 years). This policy should reassure creditors by creating
larger asset balances, smoothing income, and demonstrating WTL’s careful attention
to their physical facilities. The change must be made retrospectively (see #7).
The change to 20X3 earnings is an increase in expense of $210,000 ($910,000 -
$700,000) which means that net income after tax changes by $126,000.
Room renovation: prior 4 years
($400,000 x 4/5) + 20X3, ($700,000 x 1/5) = $460,000
Common areas: 20X1, ($600,000 x 1/3) + 20X2, ($750,000 x 1/3) = 450,000
$910,000
4. Storm damage - unusual gain

The unusual gain from insurance claim after the storm damage to a WTL ship has
been classified with revenues. More appropriate presentation would be to report this
gain separately from the results from operations, as is done with interest. The
company would report a marginal operating loss of $42,800 ($1,097,200 -
$1,140,000). While this would highlight continuing operating losses to creditors, the
amount of operating losses is readily ascertainable from the income statement as
presented. The operating loss is marginal, and certainly less than the reported “severe”
operating losses of prior years. The existing treatment might be viewed as an attempt
to hide the operating results.

5. Income tax accounting.
Deferred income tax is reported, as is consistent with comprehensive tax allocation.
Under ASPE, WTL could use the taxes payable method, which would eliminate
deferred income tax on the balance sheet (reducing liabilities) and also increase
earnings, because tax expense would decline. Tax allocation is used at the request of
lenders, who are the primary user of the financial statements. WTL might consider
revisiting this issue with lenders. For now, the policy is unchanged.
WTL has tax loss carry forwards that are not recorded. This is consistent with the
decision that use of the LCF amounts is not probable, an assessment that was
undoubtedly justified by the severe losses of prior years. WTL might consider
whether the probability of loss carryforward use has shifted to probable, given that
this year is far closer to break-even.
If use were considered probable, the $795,000 loss carry forward could be recorded as
an asset of $318,000, increasing assets and earnings. This might provide positive
evidence of recovery to lenders.
However, WTL still has operating losses, and has had a major storm damage event
this year that might impact future bookings. Prudence suggests that the balance of
probability would remain negative unless real operating profits are recorded. No
change in accounting policy is recommended. Loss carry forward note disclosure
should continue, making the information available to creditors.
6. Related party transaction
WTL is required to disclose the presence of a related party transaction, and certain
information about the related parties and the transaction. The comparable expense in
prior periods need not be disclosed. If the contract were a significant adverse contract,
a liability might be dictated as an onerous contract. However, given the overall
volume of operating expenses, this does not seem necessary. The Board of Directors
might consider the terms of this contract if it does not, in fact, represent a cost-cutting
effort.
7. Accounting changes
Revenue recognition and renovation costs require a change in accounting policy. It
appears that the prior policy in these areas was in error, and as a result, the change
must be accounted for retrospectively. This means that prior year’ financial statements
must be changed, accounting for the transaction using the new policy The cumulative
impact on prior net income is recorded as an adjustment to opening retained earnings
for all years reported. A disclosure note must explain the changes, and the impact on
earnings and net assets.
Conclusion

Overall, the required changes in accounting policy will increase the operating loss and
decrease net income by $216,000. This is a marginal change. Presentation of the
storm damage gain will highlight the results from operating activities on the income
statement.
Creditor support is critical for WTL. It might be appropriate to prepare one-year and
three-year forecasts of cash flow and earnings to include with information presented
to lenders.

Case 17-2
Soccer Incorporated
Overview
Soccer Incorporated (SI) is a public company that uses international accounting standards.
Currently, the players have raised a concern that their bonus is not being paid and want
the accounting policies to be evaluated to determine if they are appropriate. They receive
a bonus if net income is above $25 million. It is currently at $24 million. The players
have a motivation to maximize net income while management of SI has a motivation to
minimize net income. Accounting policies must be analyzed from the perspetive of the
players. It is ethically appropriate to be biased to the plyers’ advantage. Where a valid
choice exists as an advisor to the players you will want to select the one that best meets
their needs and increases income so they can obtain their bonus.
SI has a bank loan which requires audited financial statements as well as a covenant with
a maximum debt-to-equity ratio. Therefore, management of SI will be senstive to any
accounting policies that increase debt which could increase the debt to equity ratio and
violate the covenant.
Analysis and Conclusions
Each issue will be reviewed to determine if it is appropriate and if any adjustments are
required. Refer to Exhibit One of adjusted net income.
Revenue Recognition
Under the contract basis of revenue recognition, revenue is recognized when there is a
contract with customers, the contract price is set, and performance obligations are
established and satisfied. SI’s current policy to recognize revenue for tickets purchased
online is when the ticket is used. The performance obligation is satisfied when the
customer attends the game. The ticket was paid for by credit card so there is no cash
collection risk. An issue arises is the customer does not attend the game and use the
ticket. There is no indication that there is a refund. Therefore, a more appropriate policy
would be to recognize the revenue when the game is played. At this point there is no
further performance obligation to the customer. The impact of this change in policy
cannot be estimated.
For season passes, SI recognizes revenue ratably when the game is played. This policy is
not appropriate for the seasons tickets purchased where the customer receives a $50 gift
card as well. This is a separate performance obligation. The customer receives the season
pass as well as the $50 gift card. The amount paid should be split into the portion that
relates to the season pass and the portion that relates to the $50 gift card. Revenue should
be recognized for any gift cards that are redeemed in 20x9. The remaining amount would
be deferred revenue and recognized in 20x10. It must be determined how many gift cards
have been redeemed in 20x9. This will increase revenue in 20x9.

Coupons
SI expensed $200,000 which is the full amount of the coupons that they distributed. The
coupons allow customers for $2 off a game food combination ticket. SI would still be
making a profit on those tickets and there is no cash refund associated with the
coupons.Accordingly, the amount is simply reflected as rediced revenue and no
accounting recognition is required. No advertising expense should be recognized.
Loan
The bank loan for $100 million involves transaction costs of $2 million. These should not
have been expensed. The $2 million should have been capitalized to the loan; this will
reduce the value of the loan. The effective interest method would be used to recognize
interest expense over the life of the loan. The impact will be to increase net income.
Shares
The 2% investment in shares is a passive investment or non-strategic. SI has early
adopted IFRS 9 since these shares have been classified as FVTOCI. The shares had a gain
of $5 million which increased OCI. These shares could have been classified as FVTPL
where the gain would have increased net income by $5 million and the players would
have received their bonus. Unfortunately, once the shares have been designated in
FVTOCI it is an irrevocable election and cannot be changed.
As an aside, this seems a curious decision, to invest money needed for construction in a
high-tech stock. This may be a governance issue to raise with the Baord of Directors.
Construction Stadium
The stadium is a self-constructed asset. It was appropriate to capitalize the $15 million for
materials, labour and variable overhead. The construction is expected to take over two
years therefore this would be a qualifying asset which takes a substantial amount of time
to complete. Therefore, the $2 million in interest costs should be capitalized not
expensed. The strike is an unanticipated work stopage therefore costs should not be
capitalized during the period of the strike. Therefore, interest costs for 8 months/10
months construction should be capitalized. $2 million x 8/10 is $1.6 million. This would
increase net income. The interest costs during the strike would be expensed.
Term Preferred Shares

These shares are in substance debt since there is a mandatory redemption date for the
principal in ten years and any unpaid dividends. SI’s accounting policy for these shares is
appropriate.
Share Issue Costs

SI has expensed $1 million of share issue costs. This accounting policy is incorrect. The
share issue costs could have either reduced the proceeds from the sale of the shares or
been charged directly to retained earnings. Either policy would be appropriate. I

recommend the first option since this is more common in practice. This would increase
net income.
Tax Losses
SI has $10 million of unused tax losses that have not been recognized. It is assumed that
any losses that can be, have been utilized this year. SI uses the liability method for
income taxes. If the probable provision has been met SI could recognize these losses as a
deferred tax asset. There appears to be strong evidence to support the probable provision.
There is positive net income in 20x9 and the owners expect profits to increase in the
future. Therefore, the unused tax losses should be recognized as a deferred tax asset of $3
million. This increases net income.
Stock Option
The use of the Black Scholes model is appropriate to measure stock option expense. SI is
required to measure stock price volatility and currently they have not. The impact is the
higher the stock price volatility the higher stock option expense. The stock options vest
over a five year period. Currently, SI recognizes the entire expense this year which is
incorrect. The expense should be recognized over the vesting period of five years not all
in this year which will reduce the amount of the stock option expense this year. SI
recognizes forfeitures when they occur which is incorrect. The forfeiture rate should be
estimated based on past history which will reduce stock option expense.
Other Issues
There are other choices that SI has made when looking at OCI. They have decided to elect
hedge accounting. Instead they could have not elected hedge accounting which means the
derivatives would be classified in FVTPL and the $1 loss would have reduced net income
instead of OCI.
Conclusion
Based on Exhibit 1, adjusted net income is $28.8 million which is over $25 million and
the players should receive a bonus. To avoid disagreements in the future it should be
considered basing the bonus on something other than net income (prehaps revenue) or
specifying the accounting policies that would be selected where there is a choice.
Exhibit 1
Adjusted Net Income
Net income prior to adjustments .........................................$24,000,000

Revenue for gift cards redeemed in 20x9 ........................ ?
Advertising expense for coupons ........................................ 200,000
Transaction costs loan .........................................................2,000,000
Interest costs ........................................................................1,600,000
Share issue costs .................................................................1,000,000
Stock options....................................................................... ?
Adjusted net income ...........................................................$28,800,000

Case 17-3 Downhill Ski Company
Overview
Downhill Ski Company (DSC) is a company that has experienced their first loss in ten
years. Since all of the loss cannot be carried back, the company must determine if it is
“probable” to have taxable income in the future and to recognize any remaining loss as a
deferred tax asset. In determining the appropriate accounting treatment consideration to
any tax planning strategies to minimize the amount of the taxable loss is appropriate. It
must be clarified if DSC is a private company using accounting standards for private
enterprises or a public company using international standards.
Analysis and Conclusions
Loss Carryback
DSC should first carryback the loss for the past three years. Since DSC has barely
maintained profits over the past four years and we are told that the amount of the loss are
significantly greater than profits for the past three years there will still be taxable losses
remaining after carryback. The taxable loss would be carried back for the past three years
and DSC would recover past taxes paid at the actual rates in those years. A tax planning
strategy would be to refile tax returns for the past three years and not deduct CCA. This
would maximize the amount of the taxable income in the past three years to carryback the
loss.
Loss Carryforward/Deferred Tax Asset
DSC can carry forward any unused losses for the next twenty years. If DSC is a private
company they have the option of using the taxes payable method instead of the liability
method in accounting for income taxes. With the taxes payable method DSC would not
have deferred tax assets or deferred tax liabilities. They would just use the loss to reduce
future taxable income. It is assumed that DSC is using comprehensive income tax
allocation.
To recognize a deferred tax asset DSC must show that it is “probable” that they will have
sufficient taxable income to utilize the taxable loss.
The following factors support it would be probable.
• This is the first loss in ten years.

• Older athletes switching back to skiing will increase sales.
• New sales and marketing manager with strong relationships in industry expected
to increase sales.
• Development of new ski.
• Buyers lined up for new ski.

• Forecast profit for next year.
• New equipment will reduce costs for manufacturing and repairs.
The following factors support it would not be probable.
• Earnings have been declining over the past several years.

• Substantial loss this year.
• Competition from large manufacturers.
• Margins shrinking.
• Popularity of snowboarding.
I conclude that it is “probable” that the company will have taxable income and that a
deferred tax asset can be recorded. (Students could make a conclusion that not probable
or could conclude to recognize only a portion). To maximize the amount of taxable
income in future years and minimize the taxable loss this year, I recommend that we do
not take CCA this year and stop taking CCA in the future until the taxable loss has been
used up. The new equipment would have substantial CCA.

Technical Review
Technical Review 17-1
Requirement 1
20x7:
Income tax receivable (1) .......................................................110,000
Income tax expense (recovery) ........................................ 110,000
(1) The amount of loss that can be recovered in the period is $300,000. The amount of
taxes recovered in the carryback period is $110,000 ($200,000 x 36%) + ($100,000 x
38%).
Requirement 2
20x7:
Income tax receivable (1) .......................................................113,600
(1) The amount of loss that can be recovered in the period is the amount of taxable
income for the past three years of $300,000. This could be carried to the years of the
highest tax rate. ($80,000 x 40%) + ($120,000 x 38%) + ($100,000 x 36%).

Requirement 1
20x8:
The amount of loss that can be recovered in the period is the amount of taxable income
for the past three years $930,000. The amount of taxes recovered in the carryback period
is $232,500 ($930,000 x 25%)
Requirement 2
The amount of the loss carryforward is $1,500,000 – $930,000 = $570,000.
Requirement 3
20x8:
Income tax receivable ............................................................ 232,500
Deferred income tax asset ($570,000 × 28%) ....................... 159,600
Requirement 4
20x8:
Income tax receivable ............................................................232,500

Requirement 1
The amount of loss that can be recovered in the period is based on the full $2,500,000 of
taxable income in the loss carryback period. The amount of taxes recovered in the
carryback period is $695,800 ($880,000 x 26%) + ($950,000 x 28%) + ($670,000 x 30%).
Requirement 2
The amount of loss that is a carryforward is $1,000,000 ($3,500,000 - $2,500,000)
Requirement 3
20x8:
Income tax receivable ...........................................................695,800
Deferred income tax – LCF ($1,000,000 x 0.32) ...................320,000
Income tax expense (recovery) ........................................ 1,015,800
20x9:
Deferred income tax – LCF
($1,000,000 x 0.01 change in rate) +($100,000 x 0.33)43,000
Requirement 4
20x8:
Income tax receivable ...........................................................695,800
20x9:
No entry

Requirement 1
Taxable income: 20x7 20x8

Accounting earnings $ 90,000 $ (150,000)
Permanent difference:
Non-deductible expenses 10,000 10,000
Accounting income subject
to tax 100,000 (40,000)
Temporary difference:
Depreciation 20,000 20,000
CCA (35,000) (45,000)
Taxable income $ 85,000 $(165,000)
Requirement 2
The amount of loss that can be recovered in the period is based on the full $85,000 of
taxable income in 20x7. The refund is 25% of $85,000, or $21,250.
Requirement 3
Since the LCF cannot be recorded, tax expense is based on the refund and the effect of
temporary differences, ($21,250 – (($45,000 - $20,000) x 0.25)), or $15,000
The entry (not required) :
Income tax receivable .................................................................21,250

Deferred income tax – (($25,000) x 0.25) ............................ 6,250
Income tax expense (recovery) .............................................. 15,000

Requirement 1

Non-taxable revenue (30,000) (10,000)
Accounting income
subject to tax 170,000 (320,000)
CCA (80,000) (120,000)
Taxable income $130,000 $(400,000)
Requirement 2
The amount of loss that can be recovered in the period is based on the taxable income of
$130,000 in the carryback period. The refund is 25% of $130,000, or $32,500.
Requirement 3
The LCF is ($400,000 - $130,000) or $270,000
Requirement 4

Non-taxable revenue (30,000) (10,000)
Accounting income
subject to tax 170,000 (320,000)
CCA -- --
Taxable income $210,000 $(280,000)
The refund is still 25% of $130,000, or $32,500. The company can only recover what it
actually paid.
The LCF is ($280,000 - $210,000) or $70,000

The company might adopt this strategy because it was concerned that the LCF would not
be used in the carryforward period, and expire. The company has a higher UCC under this
strategy, and the tax advantages of UCC do not expire.

Requirement 1

Non-tax-deductible expenses 20,000 20,000
Accounting income subject to
tax 120,000 (270,000)
CCA (50,000) (90,000)
Taxable income $110,000 $(320,000)
The loss carryfoward is $210,000 ($320,000 less $110,000 carryback) at the end of 20X8.
Requirement 2

Deferred income tax – ($50,000) x 0.20) .............................. 10,000
Requirement 3

Non-tax-deductible expenses 20,000 20,000
Accounting income subject to
tax 120,000 (270,000)
CCA -- --
Taxable income $160,000 $(230,000)
The loss carryfoward is $70,000 ($230,000 less $160,000 carryback) at the end of 20X8.

Deferred income tax –
($50,000 refile plus $40,000 current year) x 0.20) ............... 18,000
DT Table (proof of $18,000 debit adjustment)
(in 000’s) Tax Accounting Difference DT Opening

Basis Balance Balance Adjustment
CA
20X7 20% 950 960 (10) (2) -- (2)
20X8 20% 1,000(1) 920 80 16 (2) 18
(1) All CCA has been eliminated, and assets revert to their original cost.
The company might adopt this strategy because it was concerned that the LCF would not
be used in the carryforward period, and expire. The company has a higher UCC under this
strategy, and the tax advantages of UCC do not expire.

20X3:
No entry.
LCF: $120,000
20X4:
Income tax expense ($720,000 x 0.30) ........................................216,000

Income tax payable ............................................................... 216,000
Income tax payable ($120,000 x 0.30) ........................................36,000
Income tax expense ................................................................ 36,000
LCF: $0
20X5:

20X6:
Income tax receivable ($600,000 x 0.30) + ($880,000 x 0.30) ...444,000

LCF: $1,120,000 ($2,600,000 - $880,000 - $600,000)
20X7:

Income tax payable ....................................................................98,000
LCF: $840,000 ($1,120,000 - $280,000)
20X8:
Income tax expense ($1,000,000 x 0.35) .....................................350,000

LCF: 0 ($840,000 - $840,000)

Requirement 1
DT Table
Tax Accounting Difference DT Opening

LCF
20x6 25% n/a n/a 100,000 25,000 0 25,000
20x7 27% n/a n/a 140,000 37,800 25,000 12,800
20x8 28% n/a n/a 90,000 25,200 37,800 (12,600)
Requirement 2
Impact of change in tax rate on opening balance ($100,000 x 0.02) $ 2,000

Increase in LCF ($40,000 x 0.27) 10,800
$12,800

Taxable income: 20x9

Accounting earnings $ 75,000
Depreciation 55,000
CCA (90,000)
Taxable income $40,000
Tax rate × 25%
Income tax payable $ 10,000
DT Table

CA
20X9 25% 250,000 445,000 (195,000) (48,750) (35,200) (13,550)
LCF
20x9 25% n/a n/a -- -- 2,200 (2,200)
Income tax expense ...................................................................... 23,550

Deferred income tax ............................................................... 13,550
Income tax payable ($10,000 x 0.25) .......................................... 2,500
Deferred income tax - LCF .................................................... 2,200
Income tax expense ................................................................ 300
Tax expense is $23,250

Taxable income: 20x8

Accounting earnings $ 400,000
Depreciation 80,000
CCA (120,000)
Taxable income $360,000
Tax rate × 28%
Income tax payable $ 100,800
DT Table

CA
20X8 28% 780,000 1,120,000 (340,000) (95,200) (60,000) (35,200)
Income tax expense ......................................................................136,000

Deferred income tax ............................................................... 35,200
Tax expense is $108,000

Assignments
Assignment 17-1
Requirement 1
• The current portion of the income tax provision is the tax that would be payable on
earnings if there was no loss carryforward.
• The deferred tax portion of the provision is the tax expense that will be paid in a
future period, not this year. It is the change in deferred income tax.
• The impact of the loss carryforward reflects the benefit of having a loss carryforward
to eliminate the tax payable on earnings. The loss was not recorded in prior years.
• Essentially, no tax is payable this year, because of the loss carryforward. There is tax
expense solely because of deferred income tax ($68,500).
Requirement 2
• A deferred income tax asset would be caused by a liability, such as unearned revenue
or warranty liability.
• A deferred income tax liability would be caused by an asset, such as capital assets.
Other examples, if logical, are acceptable.
Normally, deferred tax accounts are netted on the SFP. The most likely explanation of
two deferred income tax accounts is that the financial statements are consolidated, and
include multiple taxable entities. Deferred income tax accounts are not netted if they are
in different taxable entities.
Requirement 3
The loss carryforward could not be recognized in its entirety unless use of the loss was
considered to be probable. If the loss is not recorded, then this condition must not have
been met.
The remaining unrecognized loss carryforward is $406,400. The tax benefit of this, at
40%, is $162,560. If the loss carryforward were recognized, earnings and retained
earnings would increase by $162,560, and a deferred tax asset would be recognized in the
amount of $162,560.
Requirement 4
No tax is currently payable. The current portion of tax expense, $75,000, would be
payable if there was no loss carryforward.

Assignment 17-2
Requirement 1
The following factors would support the conclusion that use of the loss carryforward is
probable:
-past five years profits
-purchased competitor; new product completed filed patent; indications high success
-advertising campaign to promote new product
-lawyers indicate no merit in lawsuit
The following factors would support the conclusion that use of the loss carryforward is
not probable:
-declining profits over past five years
- risk of new product acceptance
-lawsuit patent infringement new product
Based on the information obtained from the lawyer, some would conclude that the
probable provision has been met and the loss carryforward would be recorded as a
deferred tax asset.
Requirement 2
The amount of the deferred tax asset is $1,000,000 x 38% = 380,000.
Requirement 3
If the the conclusion is that use of the loss carryforward is not probable, then the deferred
tax asset would not be recognized. The tax loss carryforward would still be carried
forward for the next twenty years. If the probability shifted to “probable” in a future year,
then any remaining loss carryforward could be recognized as a deferred tax asset at that
time.

Assignment 17-3
Requirement 1
20x4:
Income tax payable ($100,000 x 38%) ............................ 38,000
20x5:
Income tax receivable ($100,000 x 38%) .............................. 38,000
Deferred income tax asset (($240,000 - $100,000) x 38%) ... 53,200
20x6:
Deferred income tax asset (1) .......................................... 7,600
Students may also do two entries for this year; one to set up the expense and a
payable, and a second to reduce the payable and the DT asset. The end result is
identical.
(1) Remaining loss carryforward is $240,000 – $100,000 – $20,000 = $120,000 x

38% = $45,600 deferred tax asset. Current balance is $53,200 therefore deferred
tax asset is credited by $7,600. There is no income tax payable since the loss
carryforward eliminates all taxable income.
20x7:
(1) Remaining loss carryforward is $240,000 – $100,000 – $20,000 – $40,000 =
$80,000 x 38% = $30,400 deferred tax asset. Current balance is $45,600 therefore
deferred tax asset is credited by $15,200.
There is no income tax payable since the loss carryforward eliminates all taxable
income.
Requirement 2
20x4:
20x5:
20x6:

No entry.
Students may also do two entries for this year; one to set up an expense and a payable,
and a second to reduce the payable and then credit tax expense (recovery). The end
result is identical.
Remaining loss carryforward is $240,000 – $100,000 – $20,000 = $120,000. There is no

income tax payable since the loss carryforward eliminates all taxable income.
20x7:
No entry. (Or, two entries. See the comment in 20x6.)
Remaining loss carryforward is $240,000 – $100,000 – $20,000 – $40,000 = $80,000.

There is no income tax payable since the loss carryforward eliminates all taxable income.
Requirement 3
20x4:
20x5:
Deferred income tax asset (($240,000 - 100,000) x 38%) ..... 53,200
20x6:
Or, two entries. See the comments above.
(1) Remaining loss carryforward is $240,000 – 100,000 – 20,000 = $120,000. Since it

has been determined the probable provision is not met for the remaining balance,
the deferred income tax asset of $53,200 will be credited and eliminated. There is
no income tax payable since the loss carryforward eliminates all taxable income.
20x7:
No entry. (Or, two entries. See the comments above.)
Remaining loss carryforward is $240,000 – $100,000 – $20,000 – $40,000 = $80,000.

There is no income tax payable since the loss carryforward eliminates all taxable income.

Assignment 17-4
Requirement 1
Halton reported $120,000 accounting income in 20x7, and this was equal to taxable
income. Tax of $48,000 ($120,000 × .40) would be paid.
Halton reported an accounting loss of $70,000 in 20x8, again equal to the taxable loss.
This loss would be used as a carryback to generate a refund of $28,000 ($70,000 × .40).
Requirement 2
20x7:
Income tax payable .......................................................... 48,000
20x8:
Requirement 3
SCI: 20x8 20x7

Income tax expense (recovery) .............................................. $(28,000) $48,000
SFP:
Income tax receivable ............................................................ $28,000 –
Income tax payable ................................................................ – $48,000

Assignment 17-5
Requirement 1
The 20x7 $240,000 taxable income was fully offset by use of a $240,000 tax loss
carryforward. The unrecognized tax loss carryforward is now $510,000.
Tax loss carryforward:

Tax loss carryforward 20x5 ..................................................................... $630,000
Tax loss carryforward 20x6 .................................................................... 120,000
Tax loss used, 20x7 .................................................................................. (240,000)
Remaining tax loss carryforward ............................................................. $510,000
20x7:
Income tax expense ($240,000 × .35) .................................... 84,000

Income tax payable ................................................................ 84,000

The first entry records tax on 20x7 income as though there were no loss; the second
records the benefit of the loss. The two entries obviously cancel out to a zero income
tax expense but recording the two components helps keep track of the loss
carryforward. The remaining tax loss carryforward is not recorded.
Requirement 2
20x8 Entries:
Income tax payable ...................................................................... 204,000

Income tax expense (recovery) ....................................... 204,000
$510,000 (see Requirement 1) × .40

Requirement 3
20x7 Entries:

Deferred income tax asset – LCF ($510,000 × .35) ............... 178,500
Requirement 4
20x8 Entries:
Income tax payable ($510,000 × .40)..................................... 204,000

Deferred income tax asset - LCF ..................................... 178,500
Income tax expense .......................................................... 25,500
Note that the effect of a change in tax rate is adjusted to the
income tax expense: $510,000 × (.40 – .35) = $25,500.

Assignment 17-6 (WEB)
Requirement 1
Taxable income: 20x3 20x4 20x5 20x6

Accounting earnings $ 10,000 $ 15,000 ($40,000) $ 10,000
Golf club dues 3,000 4,000 3,000 4,000
Accounting income
subject to tax 13,000 19,000 (37,000) 14,000
Depreciation 6,000 6,000 6,000 6,000
CCA (3,000) (6,000) (12,000) (10,000)
Taxable income 16,000 19,000 (43,000) 10,000
Tax rate × 20% × 20% × 30% × 35%
Income tax payable $ 3,200 $ 3,800 n/a* $ 3,500
* Part of loss is carried back at rate of 20%; current year rate is not applicable. See
Requirement 2
Requirement 2
Taxable
Amounts Benefit
Tax loss ............................................................................ $(43,000)
Carryback ($16,000 + $19,000) ....................................... 35,000 $7,000 (20%)
Carryforward .................................................................... $ (8,000)
The $8,000 loss carryforward would be recorded at a rate of 30% ($2,400) if recorded in
20x5. This is the enacted tax rate in 20x5. The 20x6 rate cannot be used until enacted.
This data is used further in Assignment 17-7.

Assignment 17-7 (WEB)
Requirement 1
Note: Students should have completed Assignment 17-6 prior to this assignment.
Income tax receivable (1) ............................................................. 7,000

Deferred income tax asset – LCF (2) ........................................... 2,400
Deferred income tax (3) ......................................................... 1,500
Income tax expense (4) .......................................................... 7,900
(1) Taxable income, 20x3 & 20x4: (see solution to Assignment 17–6) $16,000 +
$19,000 = $35,000. Amount paid, $3,200 + $3,800 = $7,000
(2) Taxable loss in 20x5 (see solution to Assignment 17-6) ............................ $43,000
Loss carryback to 20x3 and 20x4 ($16,000 + $19,000).............................. (35,000)
Tax loss carryforward ................................................................................. 8,000
Benefit of tax loss carryforward (@ 30%) .................................................. $ 2,400
(3)
Tax Accounting Temporary DIT Opening
(in 000’s) Basis Basis Difference Liability Balance Adjustment
20x5 @ 30%
Capital assets $54 (a) $57 (b) $(3) $(.9) $.6 (c) ($1.5)
(a) $75,000 – ($3,000 + $6,000 + $12,000)

(b) $75,000 – ($6,000 × 3)
(c) [($75,000 – $9,000) – ($75,000 – $12,000)] × .20
(4) $7,000 + $2,400 – $1,500
Requirement 2
In order to record the benefit of the tax loss carryforward in 20x5, the company must be
able to establish that its realization during the carryforward period is probable. This is
defined as a probability of more than 50%.

Assignment 17-8
Requirement 1
Taxable income, 20x5

($150,000+$15,000+$45,000–$55,000+$25,000-$22,000) ........................ $ 158,000
($230,000+$15,000+$45,000-$92,500+$41,000-$32,000).......................... $206,500
($310,000+$20,000+$45,000-$70,000+$57,000-$55,000)……………….. $307,000
Taxable loss, 20x8
(($460,000)+$15,000+$45,000+$29,000-$23,000)……………………….. $(394,000)
Capital assets
DIT
Tax Accounting Temporary Opening
Liability
Basis Basis Difference Balance Adjustment
20x5 $345,000 $355,000 $(10,000) $ (3,500) $ 0 $(3,500)

20x6 252,500 310,000 (57,500) (21,275) (3,500) (17,775)
20x7 182,500 265,000 (82,500) (33,000) (21,275) (11,725)
20x8 182,500 220,000 (37,500) (15,000) (33,000) 18,000
Warranty
DIT
Tax Accounting Temporary Opening
Liability
20x5 $ 0 $(3,000) $3,000 $1,050 $ 0 $ 1,050

20x6 0 (12,000) 12,000 4,440 1,050 3,390
20x7 0 (14,000) 14,000 5,600 4,440 1,160
20x8 0 (20,000) 20,000 8,000 5,600 2,400
Entry, 20x5
Deferred income tax liability ($3,500 - $1,050; see table) 2,450
Income tax payable (158,000 x .35) ................................. 55,300
Entry, 20x6
Income tax payable (206,500 x .37) ................................. 76,405

Entry, 20x7
Income tax payable (307,000 × .40)................................. 122,800
Entry, 20x8
Deferred income tax liability ($18,000 + $2,400;see table)... 20,400
If King is worried about having another loss in 20x9 they would want to carryback the
loss three years to make sure they could recover taxes paid in that year.
Taxable loss ($394,000) used to recover taxes paid in 20x5 $55,300 + taxes paid in 20x6
$76,405 + portion taxes paid in 20x7 $11,800 ($29,500 taxable income x .40) =
$143,505.
Requirement 2
The entries would be the same for 20x5-20x7.
Entry, 20x8
Deferred income tax liability ................................................ 20,400
If King wants to maximize the amount of taxes they recover they will go back to the years
that they paid the highest taxes.
Taxable loss ($394,000) recover taxes paid in 20x7 first since that year has the highest tax
rate $122,800 + portion taxes paid in 20x6 $32,190 ($87,000 taxable income x .37) =
$154,990.

Requirement 3(1)
Entry, 20x8
Deferred income tax liability ................................................ 20,400
The taxable loss is now $950,000 so it would be carried back to all three years and
recover taxes paid 20x5 $55,300 + 20x6 $76,405 + 20x7 $122,800 = $254,505. There
would be remaining loss carryforward $278,500 ($950,000 – $158,000 – $206,500 –
$307,000) but since they are concerned they would have a significant loss against next
year the use of loss carryforward is not probable and a deferred tax asset would not be
recognized.
Requirement 3(2)
Entry, 20x8
Deferred income tax liability ................................................. 20,400
Deferred income tax asset ..................................................... 111,400
The taxable loss is now $950,000 so it would be carried back to all three years and
recover taxes paid 20x5 $55,300 + 20x6 $76,405 + 20x7 $122,800 = $254,505. There
would be remaining loss carryforward $278,500 ($950,000 – $671,500). The company
anticipates large profits in the next few years therefore the use of the loss carryforward is
now considered probable and a deferred tax asset would be recognized $278,500 x 40% =
$111,400.

Assignment 17-9
Requirement 1

(($200,000)+$230,000–$250,000+$150,000-$120,000) .............................. $ (190,000)
Taxable income, 20x9 (given) .......................................................................... 480,000
Accounting earnings, 20x8 (given) ................................................................... (200,000)

Accounting earnings, 20x9
($480,000–$230,000+$280,000-$230,000+$210,000) ................................ 510,000
DIT
Tax Accounting Temporary Amounts Opening
(in 000’s)
@ 38%
20x8
Capital assets 2,250,000 2,270,000 (20,000) (7,600) 0 (7,600)
Warranty 0 (30,000) 30,000 11,400 0 11,400
3,800 3,800
20x9
Capital assets 1,970,000 2,040,000 (70,000) (26,600) (7,600) (19,000)
Warranty 0 (50,000) 50,000 19,000 11,400 7,600
(7,600) (11,400)
Entry, 20x8
Deferred income tax asset - LCF ($190,000 × .38)................ 72,200
Deferred income tax (see table) ............................................ 3,800
Entries, 20x9
Deferred income tax (see table) ...................................... 11,400
Income tax payable ($480,000 × .38)............................... 182,400
To record 20x9 income before the tax loss

Deferred income tax asset - LCF ..................................... 72,200
All the LCF is used; $110,200 ($182,400 – $72,200) is still owing.
SCI 20x9 20x8

Earnings before tax ................................................................ $510,000 $(200,000)
Income tax .............................................................................. (193,800) 76,000
Earnings (loss) ....................................................................... $316,200 $(124,000)

Requirement 2
Entry, 20x8
No entry.
Deferred tax assets related to the LCF AND temporary differences cannot be
recorded, so there is no entry.
Entries, 20x9
Deferred income tax liability (balance; column 4 in table) 7,600

Deferred tax caused by temporary differences is now a credit, or liability, and must be
recorded to its correct balance (column 4)
Total income tax expense is $117,800 ($190,000 – $72,200). Income tax payable is still
$110,200 ($182,400 - $72,200).
SCI 20x9 20x8

Earnings before tax ................................................................ $510,000 $(200,000)
Income tax expense ................................................................ (117,800) --
Earnings (loss) ....................................................................... $392,200 $(200,000)
Alternatively, if students assume that the 20X8 temporary differences meet

recognition criteria:
Entry, 20x8

Entries, 20x9

Deferred income tax ........................................................ 11,400


Requirement 3
In terms of the probability assessment, both alternatives (probable and not probable) can
be justified:
Since Cloud was a new company in 20x8, one might expect that they would find it
difficult to gather appropriate evidence to show that use of tax loss carryforwards and
deferred tax assets was probable.
On the other hand, they did earn adequate taxable income in 20x9. If forecasts were
considered reliable, or sales orders were in hand at the end of 20x8, then recording the
LCF and deferred tax asset would have been appropriate.

Assignment 17-10
Requirement 1
20x4 Entry
No deferred income tax arises from the differences between accounting and taxable
income because permanent differences are the cause.
No entry—loss carryforward cannot be recognized

The tax loss carryforward is $62,000
20x5 Entry
Income tax expense ($50,000 × 38%).................................... 19,000
Income tax payable ($50,000 × 38%) .................................... 19,000

$50,000 of the tax loss carryforward is used. $12,000 remains.
20x6 Entry
Income tax expense ($82,000 × 36%).................................... 29,520

Net taxable income is ($82,000 – $12,000) = $70,000 after the tax loss carryforward.
Tax of $25,200 is paid ($29,520 – $4,320)
20x7 Entry
Income tax receivable ($70,000 × 36%) ................................ 25,200
The tax loss is $88,000. $70,000 is carried back for a refund
and $18,000 is carried forward but not recorded.

Requirement 2
20x4 Entry
Deferred income tax asset—LCF ($62,000 × 36%)............... 22,320
20x5 Entries

Deferred income tax asset—LCF (1) ............................... 17,760
Income tax expense (2) .................................................... 1,240
(1) Opening balance in deferred income tax asset ................. $22,320

Required closing balance ($62,000 – $50,000) × 38% .... 4,560
Decrease to account ......................................................... $ 17,760
(2) Opening LCF × change in tax rate: $62,000 × (38% – 36%)
20x6 Entries

Income tax expense (1) .......................................................... 240
Deferred income tax asset—LCF (balance) ..................... 4,560
(1) Opening LCF × change in tax rate: $12,000 × (38% – 36%)
20x7 Entries
Deferred income tax asset—LCF ($18,000 × 32%).............. 5,760
Income tax receivable ($70,000 × 36%) ................................ 25,200

Assignment 17-11
Requirement 1
Tax loss carryforward ($334,400 ÷ 38%) ...................................................... $880,000

Tax loss used in 20x9..................................................................................... (50,000)
Tax loss carryforward remaining ................................................................... $830,000
Opening balance, deferred income tax asset .................................................. $334,400

Required closing balance ($830,000 × 40%) ................................................. (332,000)
Credit to deferred income tax asset ................................................................ $ 2,400
20x9 Entries
Income tax expense ($50,000 × .40) ...................................... 20,000

Deferred income tax asset—LCF (see above) ................. 2,400
Note that the second entry combines two things—the elimination of the income tax
payable account, $20,000, and the effect of the tax rate change on the opening balance
of the deferred income tax asset account, $17,600 ($880,000 × .02 = $17,600).
Requirement 2
Tax loss carryforward (above) ....................................................................... $ 880,000

Tax loss, 20x9 ................................................................................................ 220,000
Tax loss carryforward .................................................................................... $1,100,000
Opening balance, deferred income tax asset .................................................. $ 334,400

Required closing balance ($1,100,000 × .40) ................................................ (440,000)
Debit to deferred income tax asset ................................................................. $ 105,600
20x9 Entry:
Deferred income tax asset—LCF ........................................... 105,600
$105,600 is the benefit of the current year loss, $88,000 ($220,000 × .40), plus a
$17,600 ($880,000 x .02) increase to the opening balance.

Assignment 17-12
Requirement 1
Taxable loss:
Accounting loss ........................................................................................ $(480,000)
Add back: depreciation ............................................................................ 67,500
Taxable loss ............................................................................................. $(412,500)
Requirements 2, 3 and 4
The loss carryback will be $324,750, resulting in a refund (benefit) of $81,450. This
leaves $87,750 ($412,500 – $324,750) as a tax loss carryforward. The benefit of this tax
loss carryforward is $35,100 at 20x5 tax rates of 40%. The tax loss can be recorded as an
asset if it is more probable than not that the company will realize the tax loss
carryforward in the carryforward period.
Requirement 5
Income tax receivable .................................................................. 81,450

Deferred income tax (LCF) .......................................................... 35,100
Deferred income tax * .................................................................. 27,000
*$7,455,000 – ($9,630,000 – $67,500) = $(2,107,500) × 40% =
$(843,000) vs. $(870,000) op.
Requirement 6
Income tax receivable .................................................................. 81,450

Deferred income tax ..................................................................... 27,000
Requirement 7
(a) LCF has been recorded:

Income tax expense ($150,000 × 40%)........................................ 60,000
Deferred income tax (LCF) ................................................... 35,100
(b) LCF has not been recorded:

Income tax expense (recovery)—LCF recognition ................ 35,100

Assignment 17-13
Requirement 1
20X7 entry
Income tax receivable1 .......................................................... 477,300

Deferred income tax asset—LCF ($225,000 × 36%)............. 81,000
1
Carryback for past three years:
Taxable
Year Tax rate Tax paid
income
20X4 $165,000 34% $56,100
20X5 540,000 34% 183,600
20X6 660,000 36% 237,600
$1,365,000 $477,300
Carryforward available: $3,330,000 loss – $1,365,000 carryback = $1,965,000;
However management estimates the company will only utilize $225,000 of this
amount.
Requirement 2
20X8 entry
Income tax expense ($375,000 × 36%).................................. 135,000

Deferred income tax asset—LCF ..................................... 81,000
Deferred income tax asset—LCF ($1,590,000 × 36%).......... 572,400

[To recognize the previously unrecognized loss carryforward]
At the end of 20X8, the unrealized loss carryforward is $1,590,000 ($3,330,000 –

$1,365,000 - $375,000), all of which is now recognized.
20X9 entry
Income tax expense ($915,000 × 40%).................................. 366,000

Income tax expense (recovery) ($1,590,000 × 40%) ...... 63,600

Assignment 17-14
Requirement 1
20x5 20x6 20x7 20x8 20x9
Pretax earnings (loss) $ 80,000 $120,000 $ 50,000 $(550,000) $ 110,000

Add: golf club dues 2,000 2,000 2,000 2,000 2,000
Add: depreciation 25,000 25,000 30,000 30,000 30,000
Deduct: CCA (50,000) (90,000) (14,000) 0______ __0____
Taxable income (loss) $ 57,000 $ 57,000 $ 68,000 $(518,000) $142,000
Tax loss carryforward available:

Loss for tax purposes, 20x8 ........................................................................... $518,000
Loss carryback (20x5 $57,000 + 20x6 $57,000 + 20x7 $68,000): ................ (182,000)
Tax loss carryforward available, 20x8 ........................................................... $336,000
20x8 Entry:
Income tax receivable ($182,000 × .4) .................................. 72,800

Deferred income tax asset—LCF ($336,000 × .4) ................. 134,400
Deferred income tax (see table) ............................................. 12,000
20x9 Entries:

Income tax payable ($142,000 × .4)................................. 56,800

Requirement 2
Balance in deferred income tax:

Deferred income tax asset—LCF ($134,400 – $56,800) ......................... $77,600 dr.
Deferred income tax (see table) ............................................................... 5,600 cr.
Total ......................................................................................................... $72,000 dr.

Deferred Income Tax Table
(amounts in thousands)
Tax Accounting Temporary Deferred Opening

basis Basis difference income tax balance Adjustment
20x5–40%
Capital assets $450 $475 $ (25) $ (10) $ 0 $(10)
20x6–40%
Capital assets 360 450 (90) (36) (10) (26)
20x7–40%
Capital assets 346 420 (74) (29.6) (36) 6.4
20x8–40%
Capital assets 346 390 (44) (17.6) (29.6) 12
20x9–40%
Capital assets 346 360 (14) (5.6) (17.6) 12
Requirement 3
20x5 20x6 20x7 20x8 20x9
Pretax earnings (loss) $ 80,000 $120,000 $ 50,000 $(550,000) $ 110,000

Add: golf club dues 2,000 2,000 2,000 2,000 2,000
Add: depreciation 25,000 25,000 30,000 30,000 30,000
Deduct: CCA (1) 0 0 0 0______ __0____
Taxable income (loss) $ 107,000 $ 147,000 $ 82,000 $(518,000) $142,000
(1) Was $50,000, $90,000 and $14,000, respectively
Tax loss carryforward available:

Loss for tax purposes, 20x8 ........................................................................... $518,000
Loss carryback ($107,000 + $147,000 + $82,000) ........................................ (336,000)
Tax loss carryforward available, 20x8 ........................................................... $182,000

Deferred Income Tax Table
(amounts in thousands)
Tax Accounting Temporary Deferred Opening

basis Basis difference income tax balance Adjustment
20x8–40%
Capital assets 500 (1) 390 110 44 (29.6) 73.6
20x9–40%
Capital assets 500 360 140 56 44 12
(1)$500,000 original cost; all CCA has been eliminated
20x8 Entry:
Income tax receivable (1) ..................................................... 72,800

(1) (20x5 $57,000 + 20x6 $57,000 + 20x7 $68,000); $182,000 x 0.4
20x9 Entries:

Income tax payable ($142,000 × .4)................................. 56,800

Balance in deferred income tax:

Deferred income tax (see table) ......................................................... $140,000 dr.

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arrive, so that by morning the place was covered with tents and
wagons, and swarming with people, horses, mules and cattle.
7th.—At an early hour we were again moving, in order to reach the
Elkhorn Ferry before any of the trains should take the precedence,
whereby we would have been detained. We had first to cross the
Papilion on a bridge, and as it was very narrow, and the road leading
to it very steep, we were obliged to unharness the mules from the
wagon, lest they might, by pushing one another, precipitate the
wagon and themselves into the stream and mud below. The wagon
was then pulled across the bridge by hand. Ascending the opposite
hill, we were again on the high prairie. Before us, twelve or fifteen
miles distant, could be discovered the timber of the Elkhorn, which
we expected to cross before noon;—to our right we could yet
perceive the timber of the Missouri, and the Old Council Bluffs,
where formerly there was a fort for the protection of the traders;—
and to our left the timber of the Platte.—
Arrived at the Elkhorn, we saw a considerable number of
Pawnees, who all appeared glad at our coming to visit them. Here
we learnt that a slight affray had taken place the day before,
between some Pawnees and a train of emigrants. The readers of the
Miscellany have perhaps read of such cases in the newspapers,
headed: “Depredation of the Pawnees (or some other Indians) upon
a train of emigrants,” and the like, where the blame is generally
attached to the Indians. I think it is due to the Indians to state here
that the fault does not always lie with them, but very often with the
whites. The road of the emigrants lies through the country belonging
to the Indians;—their hunting-grounds are traversed by the long lines
of white-covered wagons, and the buffaloes, the principal
subsistence of the Indians, are thereby chased away to more distant
and more secluded pastures, perhaps to regions where it would be
unsafe for them to hunt, on account of other tribes inimical to them;
and they have thereby been reduced to poverty and want. For all
these privations they have been promised presents, as a
compensation, from our Government, but thus far they have received
nothing. So when the emigrants are passing through their country,
they frequently apply to them for tobacco, or some other small
presents. It seems that in the above instance, while the Pawnees
were hovering around the train, they were refused a present, and
one of the men, with the ox-whip, struck an Indian, who came near,
which, of course, roused the feelings of the Indians. These
accordingly drove off a beef or two, which were then despatched.—
The Elkhorn at this place is a deep and rapid stream, about 20
yards wide. Two French halfbreeds are living here, in order to keep a
ferry for the emigrants.—Having passed over the Elkhorn, our road
lay across a bottom prairie extending between the Elkhorn and Platte
rivers. We now turned off from the wagon road, taking the village for
our landmark; without any track across the prairie, and soon arrived
on the north bank of the Platte.—The grass being somewhat more
advanced in the bottom than on the high bluff on the opposite side,
where the village is situated, the Pawnees had turned their ponies to
graze in the bottom, watched by the women and children.—Many
women were also engaged in digging for roots with their hoes,
provisions being at present very scarce among them. We were soon
surrounded by a crowd of young men, women and children, who by
their smiling countenances seemed to bid us welcome.—It is difficult
to describe our feelings on the present occasion. We were now in
sight of the village, where the people lived, whom we had come to
visit, in order to give them the opportunity of accepting or rejecting
the offer of having Missionaries to live among them, to lead them to
the Savior of sinners. A wide stream, over a mile across, separated
us from the object of our journey, and could not be crossed without
getting assistance from the very people, for whose benefit we had
come. From the conversation of Mr. Allis and Mr. Sharpee with the
Indians there seemed to be some difficulty in getting help, originating
in a jealousy existing between the Chief in our company and the
principal Chief of the village. Meantime it commenced raining, and a
strong, chilly wind was blowing, which forced us to wrap ourselves in
our blankets. In this perplexity nearly an hour was spent. At length a
messenger was despatched across the river to inform the principal
chief of the village, Siskatuppe, of our arrival, with the request that
he would send us some men to assist us to cross. After another
hour’s patient waiting we were cheered by seeing the chief with
about twenty men coming to our help.—The ford of the river is only
about four feet at the deepest places, but what makes this river
peculiarly perilous in crossing is the shifting quicksand at the bottom,
so that, while crossing, it is necessary to keep constantly moving;—
for the moment a person stops he begins to sink on account of the
uncertain foothold.—Our baggage was placed upon the backs of
Pawnees, who immediately started off with their load. The mules
having been unharnessed, and the harness placed in the wagon, a
long rope was tied from the end of the tongue of the wagon to each
single-tree. The Pawnees then took hold of the rope, while some
pushed behind at the wagon, and thus proceeded into the river. Mr.
Sharpee kindly offered br. Smith his horse, while he and br. Oehler
each took a mule, and Mr. Allis borrowed a pony of the Pawnees, the
mounted men taking up the rear. A full half hour was consumed in
crossing, and passing over two islands on our route. At length we
reached the opposite bank, where we were greeted by numbers of
Pawnees, who were awaiting our arrival. A difficulty which now
presented itself before us was to get the wagon up the steep bluff,
the sides of which had become slippery by the falling rain. To obviate
this difficulty it was necessary to go nearly a mile down the river,
through their cornfields, in the bottom, to a place where it was not
quite so steep as elsewhere.—At length, being arrived at the village,
we found, in spite of the rain, crowds standing around the chief’s
lodge, to receive and to welcome the missionaries.—
Having secured everything loose about the wagon that might be
liable to be stolen, and entrusted our baggage, harness and animals
to the care of the chief, we entered the lodge of our host. We were
not a little surprised, when we came in, to find that it was a spacious
apartment, a description of which will be given at another time. We
had hardly reached the place when a young gentleman in the
employment of the Government arrived in company with the United
States interpreter at Fort Kearney, a black man, who speaks the
Pawnee fluently. They had travelled the whole distance, without an
escort, alone;—Fort Kearney being about 150 miles further up the
Platte river. This young man was sent out to the different tribes of
Prairie Indians, the Pawnees among the rest, in order to invite them
to attend a General Council of Tribes at Fort Laramie, to be held
about the beginning of September.
While Mr. Allis and ourselves, and the above-named persons from
Fort Kearney lodged with Siskatuppe, the principal chief of the
village, Mr. Sharpee put up at the lodge of the chief Gatarritatkutz,
who had travelled with us, and with whom he is accustomed to tarry
whenever he comes to the village to trade.
After we had spent an hour in drying our clothes, smoking, and
conversing with some of the chiefs and braves, a messenger arrived
from Mr. Sharpee, inviting us to be present at a feast of coffee and
crackers, which he had prepared for the chiefs, during which he
intended to make inquiries respecting his stolen horse. When we
arrived Mr. Sharpee informed us that, as the principal men were now
assembled, it would be a convenient opportunity for us to hold a
council with them. We accordingly commenced by informing them of
our object. The jealousy between the chiefs, however, became
apparent, and after some consultation among themselves
Siskatuppe intimated that some of the chiefs were not present, and
as the business before us was of great importance to the whole band
they ought also to be summoned. It was, therefore, resolved
immediately to adjourn to his lodge, in order to receive our
communications. Accordingly all the chiefs and braves having been
assembled, we were informed that they were now ready to hear us.
Br. Smith then in a speech, which was interpreted by Mr. Allis,
informed them of the object of our visit. Hereupon Siskatuppe made
an address, welcoming us in the kindest manner and hoping that we
might send missionaries among them. Br. Oehler then, in an
address, explained to them more particularly the object which
missionaries have in view, and that it was especially our present aim
among them to find out whether they were desirous not only of
having their outward condition bettered, but of having the
missionaries among them to teach them about a Savior, who came
into this world to save us from our sins, to preach whom was our first
and principal design. Several other chiefs and braves then made
speeches, expressive of their satisfaction at our coming to see them,
and welcoming us to live with them, promising us their protection; so
that we should in no wise be hindered by any of their people; and
that we might rest assured that our cattle and all other property
which we might bring along with us should not be destroyed or
molested by any one. Moreover, they acknowledged that they
needed instruction, and that they would all be willing to listen to us.
We were very much pleased with the apparent earnestness with
which these remarks were made, and have no doubt that they made
these promises in good faith. Before us were thus assembled the
nobility of the village,—the chiefs and braves, besides numbers of
the common people, at least 500 in all, sitting in solemn council.
What a spectacle for the humble missionaries of the cross! Here
were the representatives of a village, numbering at least 2,500 souls,
deliberating upon the acceptance or rejection of missionaries,—
holding a council, unconsciously, whether the time in the providence
of the Lord had at length arrived, when they should again be
instructed in the knowledge of the “Unknown God,” whom they, and
their fathers and forefathers have worshipped, though in great
ignorance and superstition. O, how cheering to our hearts, when we
were not merely coldly permitted to make our abode with them, so
that they might derive from us some temporal good, in supplying
their wants when hungry and destitute; but when we were hailed and
welcomed among them as the “Medicine men of the Great Spirit,” to
have whom among them, would better their outward condition, and
perhaps (as we ardently hope and pray, through the blessing of our
Lord,) make them a happy and christian nation. Of what vast
importance may have been this solemn hour for these people?—the
future, we humbly trust, will develop many happy results from the
decision of this council; but Eternity alone may reveal, that the
happiness or misery of many a soul, bought by the precious blood of
Jesus, was connected with the results of this occasion!
Our business with them being over, the above-named young man,
in the employ of the government, also made known to them that their
Great Father at Washington had invited them to a grand council of
the different nations, to be held at Fort Laramie for the purpose of
defining the territories of the different prairie tribes, who were also to
receive presents there from him, as a compensation for the losses
which they have in later years sustained, on account of the scarcity
of the buffaloes, occasioned by the great emigration to the far West,
etc.,—at all which they expressed their great satisfaction. After the
crowd had somewhat dispersed, a dish of soup, made of hominy and
beans, was placed before us, with two spoons, made of buffalo
horns, in the dish. Having fasted since sunrise, we could not
complain of our appetites, and the dish, though not attractive in its
appearance, was soon emptied of its contents. We then prepared
some coffee, and having supped, gave our chief and his family a
feast of the remaining coffee, with some crackers and slices of ham.
We had hardly finished, (much time was not consumed in washing
our dishes,) when a messenger arrived, inviting us to a feast, which
one of the chiefs had prepared for us. When we arrived, and had
seated ourselves on mats around the fire, (for there are no chairs in
a Pawnee lodge,) a dish of soup, made of corn, was again placed
before us. As our appetites had previously been satiated, we could
merely partake of a few spoonsful, to please our kind host. We had
hardly entered into a conversation when an invitation came from
another chief;—and so we were led from lodge to lodge, till we had
partaken of about a dozen feasts. At last we returned to the lodge of
Siskatuppe, and, having wrapped ourselves in our blankets, and laid
ourselves down on mats on the ground, were soon in the land of
visions.
May 8th.—Early in the morning we were awakened by the shrill
voices of the Pawnee women, who were engaged in cleaning up the
lodge, and collecting their hoes, previous to their going out to the
fields to prepare the ground for planting corn. Our breakfast being
over, and having had our animals brought from the pasture, we,
together with the gentleman from Fort Kearney and his interpreter,
started for the upper village, distant about 25 miles, accompanied by
our old friend Gatarritatkutz and another Pawnee. Our road was
again for several miles across the high prairie. We then descended
into the bottom prairie of the Platte, travelling about five miles in sight
of the river, when we made a halt near the stream in order to prepare
dinner. The situation here pleased us very much, as very suitable for
a mission station, should the Pawnees be permanently located
where they at present reside. The timber on the islands in the Platte
is very easily obtained here. The prairie bottom is from two to three
miles wide, gently ascending to the bluffs, and extends about ten
miles along the Platte, before the bluffs again approach the river. A
mile or two from where we took our lunch a beautiful spring of never
failing water gushes forth from the bluff. After dinner, having
permitted our animals to graze a while, we proceeded on our
journey, travelling partly on the high prairie, after ascending the bluff,
and partly in the bottom. At a certain place, as we were travelling
along, we noticed, that our Pawnee friends rode aside to a spot,
where their attention seemed to be rivetted upon something on the
ground. Inquiring what it was, they informed us, that at that place
about nine or ten months ago, a Sioux chief had been killed by the
Pawnees. It seems, he had made a hostile incursion upon the
Pawnees, with a company of his people, and having found some
squaws engaged at work in their fields, he had killed them. The
Pawnees, irritated at this unprovoked attack, immediately made up a
party, who hotly pursued their enemies, and, the horse of the Sioux
chief being wearied, and not able to keep up with the rest, he called
to his men: “Stop not for me, but save yourselves; I shall die
fighting.” His pursuers soon came up with him and killed him, fighting
bravely. The spot where he had been killed still presented the marks
of Indian barbarity; stones, arrows, and small pieces of the skull,
which had been cleft by their tomahawks, lying around,—the bones
having been carried away with the carcass by the wolves of the
prairie. We turned away in disgust from a place, which had been the
scene of such a barbarous atrocity, praying only the more fervently
to the Lord, that the passions of these poor people might be softened
down by the all-subduing influence of His blessed gospel, through
the happy effects of which alone, we have been made to differ.—
As we were approaching the upper village we observed sentinels
standing on the highest bluffs, posted there, it seems, to watch the
approach of any strangers. The first that we observed was at a
distance of five miles from the village. In the bottom prairie, numbers
of ponies, the property of the village, were grazing, watched by
women and children. As we approached the village, young men and
boys joined our caravan, and when at last we arrived there a dense
crowd of children surrounded us, eager to see the visitors of their
village, so that it was necessary for a chief to come to our aid, who
opened a way through the immense throng for our wagon to proceed
on to the lodge, where we were to put up. We were here, as well as
at the other village, struck with the large proportion of children, a
circumstance not generally observable among Indians. Mr. Allis
informed us that visiting them a few months previous (the smallpox
having appeared among some of the Indian tribes) he had
vaccinated about 1,500 under 14 years of age (in a population of
hardly 6,000); the last time that the whole tribe had been vaccinated,
having been 14 years ago.
The village stands on a rising ground, about three miles from the
river, and consequently the same distance from the nearest timber.
In a valley near by flows a beautiful stream, from which the people of
the village are supplied with water.
The lodge, where we were to remain, was the medicine lodge of
the village, and just as we entered it we found a company of about a
hundred men engaged in dancing a medicine dance, in order to
propitiate the Great Spirit, to grant them prosperity in the
approaching buffalo-hunting season, and protection from their
enemies. Their naked bodies were painted in the most grotesque
manner, their hair and weapons plumed with eagles’ feathers, and
thus armed with bows and arrows, spears, and shields, they were
dancing to the beat of the drum, intermingled with songs. Their yells
rent the air, while the very earth seemed to shake under their feet.
After we had sat in the lodge a few minutes, a dense crowd of two or
three hundred children filling up the space at the entrance, whose
curiosity was probably more attracted by us than by the dancers, a
chief came forth from the dancing party, with a whip in his hand, at
sight of whom the children made for the door, but as it took some
time before the crowd could get out by the narrow opening he
commenced plying his whip most unmercifully on the naked backs of
the poor children till the entrance was cleared. We were then
informed that on account of our arrival, out of deference to us, they
would now dance outside; if, however, we wished to look at them
while dancing, we were welcome to come out and see them.—After
a little while we went out and looked at them for some time, while
they were engaged in these religious exercises. Our hearts melted,
and our eyes filled with tears at the thought of the benighted state of
their minds, living without Christ, and without hope. We were not
long engaged in these mournful reflections, when a messenger
arrived inviting us to a feast. We followed the messenger, who led us
to a lodge, which we entered. Our host, who had prepared a feast for
us, was no other than the chief of the Grand Pawnee Band, and
principal chief of the whole Pawnee nation. He received us in a very
warm and affectionate manner, embraced us, and welcomed us
among his people. His name is Asseruregarrigu;—he seems to be
extremely old, on the verge of the grave, yet, in spite of his great
age, is still very much respected by his nation. After being invited to
sit down on mats, a dish of green corn soup was placed before us,
which was very palatable. The old man complained, that the corn
had not been sufficiently boiled, as he had ordered it to be put over
when he heard of our arrival, and had been anxious to be the first to
welcome us by a feast.—
Our repast being finished, we were yet invited to several feasts
prepared by the chiefs of the village, whereupon we returned to the
medicine lodge. In the evening a council of the chiefs and braves
was called, in order to inform them of the business upon which we
had come to visit them. We were received in the most cordial
manner, embraced by several of the chiefs, and after informing them
of our object the principal chief of the Pawnee tribe, aforementioned,
made a reply to the following effect: “It appears to me this evening as
though I had been dead a long time and had suddenly to-day risen
from the dead,—so glad am I to hear the news that teachers are
willing to come among us, in order to live with us and instruct us. We
shall welcome you among us, and the chiefs will see to it, that your
property and cattle shall be protected;—I hope you will come soon to
live with us. I am now a very old man,—I must soon go hence;
therefore come soon that I may behold the missionaries living among
my people before I die.” Speeches to a similar effect were then made
by Leezikutz, chief of the Republican band, Terrericawaw, chief of
the Topages (pronounced Tuppay) band, and two or three other
inferior chiefs, which were all interpreted; and finally a chief named
Lalogehanesharn (or Fatty, as he is called by the whites, from his
corpulence, something very unusual among wild Indians) closed by
making a long appeal to the chiefs, delivered in a very loud and
sonorous voice, exhorting them to keep the promises which they had
just made. “Don’t cheat,” said he; “don’t act deceitfully. You have now
promised these men that if they come to live among us you will take
them under your protection, and will always restrain your people
from molesting their property. Remember this, and now since you
have made these promises, see to it that you also keep them.” The
council then dispersed, not, however, before several chiefs had
again embraced us, whereupon we laid ourselves down in our
blankets upon the mats in the lodge for repose.
May 9th.—After breakfast we were invited to the principal chief’s
lodge, to attend a council which had been called for the purpose of
listening to the invitation sent to them by the President of the United
States through the above-mentioned agent, to attend a general
council at Fort Laramie. The Pawnees declared themselves satisfied
with the offers of government, and several speeches were then
made expressive of the prospect that ere long the condition of their
people would be bettered, especially since they might now indulge
the hope of soon having teachers among them to give them
instruction. During the council a severe thunderstorm was passing
over, and while the chief, Fatty, was speaking, after a loud peal of
thunder: “See,” said he, “the Great Spirit is pleased with us this
morning and expresses his satisfaction by speaking loudly to us!!”—
At the close we were yet invited to partake of a feast with them. A
large dish of corn-soup was brought in and set before the chiefs;—
the medicine man then came forward, and, taking a spoonful of the
soup, went to the fire, and making a small hole in the ashes he
poured it in. After putting the spoon back again into the dish he
returned to the sacrifice at the fire, which was blessed thrice by
holding both hands over it; then, turning round to the assembly, and
fronting the chiefs, looking up to heaven, he stretched out his hands
thrice in silent benediction, and then returned to his seat. The dish
was then passed round, each person partaking of a mouthful or two
of the soup.
The council being over, and the thunderstorm having somewhat
subsided, towards noon we started on our return, the object of our
visit to the Pawnee villages being now fully accomplished. We had
now only to retrace our steps, as that was the nearest way for us to
travel. We prepared our coffee and lunch at the same beautiful spot,
where we had halted yesterday. In getting a fire, however, to boil our
coffee, we had considerable trouble, the matches in our pockets
being damp, and the grass and wood being all wet from the rain,
which was yet falling. But at last our Pawnee friends succeeded in
finding some dry rotten wood, which, by means of paper and powder,
we succeeded in igniting. In the evening we arrived at the Lower
Village, where we staid over night at Siskatuppe’s lodge.
May 10th.—Towards morning a very heavy thundergust passed
over the village, and the water came pouring into the lodge, from the
small opening above (which is made to let out the smoke), and the
shrill voices of the women, who seemed to be scolding one another
while engaged in cleaning up the water, disturbed us considerably in
our slumbers. In the morning the Pawnees informed us that the
Platte was rising; we, therefore, hastened to get ready for travelling,
and crossed the river without much difficulty, in the same manner as
at the first time. Arrived at the opposite bank, we made a present of
some tobacco to our Pawnee friends, for assisting us in crossing the
river. A large company of Pawnees followed us, who intended going
to the Omahaw village in order to trade for corn. When we arrived at
the ferry of the Elkhorn, a heavy gust was threatening to overtake us,
and we had hardly crossed, secured our baggage, and got into the
hut of the ferrymen, when a furious hailstorm passed over us. The
rain having detained us so long, that it was impossible to reach
another camping ground by daylight, we pitched our tent here for the
night.
May 11th.—During the night, another gust passed over us, but our
tent kept us dry and comfortable. One of the ferrymen, who had
arrived during the night from Council Bluffs, informed us that the
bridge across the Papilion, over which we had passed, had been
washed away by the high water occasioned by the heavy rains, and
that he had been obliged to swim the stream, which had swollen to
the size of a river. We, therefore concluded to take another route,
which would lead along a high ridge between the Great and Little
Papilion, and strike the former opposite the Omahaw village, at the
confluence of the two streams, where we hoped to get assistance,
should we find any difficulty in crossing.
When we arrived at the place, we found both streams very much
swollen by the heavy rains. Collecting some wood together, we
made a fire, and prepared our dinner, while the party of Pawnees,
who had followed us, were busied in crossing the Little Papilion, in
order to get to the Omahaw village. After we had finished our meal,
and had come to the crossing of the Great Papilion, preparations
were made for getting our wagon, baggage, and ourselves on the
other side and here we found Mr. Sharpee, who has travelled several
times to the Rocky Mountains, and was accustomed to meet with
such exigencies as the present, to be of invaluable service to us.
Under his direction the tent-cloth was spread out on the ground,
upon which was placed the wagon-body. The corners of the cloth
were then laid over the body, and around the whole a rope was
tightly tied to keep the cloth firmly adhering to it. Thus a boat was
soon constructed, in which the forewheels and tongue were put, and
then launched in the stream, with Mr. Sharpee and Mr. Allis on
board. A rope had previously been attached, the end of which an
Indian took in his mouth, and swam across, the boat being drawn
after him. The contents being quickly taken out on the other side, it
was towed back again by the Indian with Mr. Sharpee still in it. The
second load consisted of the hindwheels with Mr. Sharpee and br.
Oehler. Meanwhile another Indian had formed a boat of a buffalo-
skin, stretched out by sticks placed crosswise, in which the baggage
was all safely transported to the other side. The animals were driven
into the stream, and forced to swim across. Finally, the boat was
brought over the third time, and br. Smith and a lame Pawnee man
were taken to the other side. When the boat had made this its last
trip, it had not leaked more than about an inch of water. During the
whole time, while we were crossing, the rain was pouring down in
torrents upon us. Having now safely gained the other shore with all
our effects, and put everything in travelling order, we proceeded
about three miles farther, when we came to a slough, which had also
been filled up by the rains. It was impossible to ford it, at the place
where the road led across. After reconnoitering a little, we found a
place where the water was fordable, but with an almost
perpendicular bank of about ten feet on the other side. The mules
having been unharnessed, Mr. Sharpee and br. Oehler took them
across, although they almost stuck fast in the mud. Mr. Allis and br.
Smith then pushed the wagon into the slough, thus forming a bridge
for them to cross over. All hands were then employed in pulling the
wagon out of the mud up the bank, till the end of the tongue reached
the top, to which the doubletree was then tied. The mules being
reharnessed, and all the other available muscular power being
applied in pushing up the wagon, we finally succeeded in getting it
up on the bank. We had now yet two miles to travel, in order to reach
the Presbyterian mission station at Bellevue, and were truly thankful
that there were no more streams or sloughs to cross. About
sundown we arrived at our station, and were heartily welcomed by
Mr. McKinney and the Mission family, though our outward
appearance was not very prepossessing, our clothing being
bespattered with mud, from the various adventures of the day.—
On the 14th of May the steamboat El Paso came up the Missouri
to Council Bluffs, and on the morning of the 15th we took passage in
her down the river. On the evening of the 16th the boat arrived at
Weston, and in the afternoon of the 17th left there for Kansas, where
we arrived at dark. After breakfast on the following morning, the
18th, we proceeded to Westfield, eight miles, on foot, where we
arrived just as the congregation were leaving the church after the
service, which had been held by the national assistant, Frederic
Samuel—truly thankful to the Lord to find all well at home, after an
absence of nearly four weeks.
DESCRIPTION
OF THE MANNERS AND CUSTOMS OF THE PAWNEE INDIANS
(By Br. D. Z. Smith.)
Bands or Clans.—All the Indian tribes are subdivided into bands

or clans. The Pawnees have among them four distinct bands, viz.,
the Loups (pronounced Loos), the Republicans, the Topages
(Tuppays), and the Grand Pawnees. Each band has at its head a
Chief, among whom, however, the Chief of the Grand Pawnees,
Asseruregarrigu, is considered the Principal Chief of the whole tribe.
Villages, Localities, former Missionaries, &c.—The Pawnees
live in two villages at present, both on the South side of the Platte or
Nebraska river. The lower village lies about 50 miles from Bellevue,
and about 10 or 15 miles above the mouth of the Elkhorn river, the
first important tributary of the Platte from the North; and the upper
village is situated about 20 or 25 miles above the lower, nearly
opposite the mouth of the Loup Fork of the Platte, the next branch of
any consequence above the Elkhorn. Both villages are situated on
eminences, so that the approach of an enemy can easily be
observed, and a sharp lookout is constantly kept in order to guard
against any sudden surprise from a hostile force. Sentinels are
constantly posted on all the surrounding heights, who can
immediately by signs, known among the Indians, transmit
intelligence in case of impending danger. During the night, sentinels
are constantly perched upon the tops of the lodges, to guard against
any unexpected nocturnal attack. When we were on our return, and
remained over night at the Loup village, a report, probably a false
alarm, had reached there during the day, that a large war-party of
Sioux had lately been seen near the head waters of the Elkhorn
river. During the night sentinels were as usual posted upon the
lodges, a little more noisy, however, than generally, yelling to one
another and singing, nearly the whole night. Upon our inquiring why
the sentinels made so much noise, we were informed that it was to
let the Sioux know, should they be near, that they might not expect to
find them off their guard.
Thus it will be observed that a certain kind of military organization
is constantly kept up at each village, rendered necessary by their
wars with their enemies. This unpleasant state of things can only be
removed through the benign influence of the Gospel, when “they
shall beat their swords into plough-shares, and their spears into
pruning-hooks: nation shall not lift up a sword against nation, neither
shall they learn war any more. But they shall sit every man under his
vine and fig-tree; and none .” (Mic. 4:3, 4.)
As hinted in a note in a previous communication, the Pawnee
villages are not located on their own land. Formerly the land on both
sides of the Platte river belonged to them. But about the year 1835
they concluded a treaty with the United States, in which they ceded
to the latter all their territory on the South side of the river. Their
villages were then situated about 150 miles further up the Platte on
the North side. The missionaries of the A. B. C. F. M. were then
residing with them, their mission stations being situated in the vicinity
of these villages. When the Pawnees were at their homes, which is
only four or five months of the year (the remaining months being
consumed on their summer and fall hunts), the missionaries were
engaged in teaching such of their children as could be induced to
attend school, and in instructing the people in the truths of religion,
as well as they could according to their limited knowledge of the
language. About six years ago, the powerful Sioux made repeated
incursions into the Pawnee country, and the strength of the latter
being very much weakened by their frequent wars with their
enemies, they were obliged to succumb, and at length forced to
leave their former location on the North side of the Platte, and to
remove to the South side, nearer to the white settlements on the
Missouri river. The missionaries, too, found it unsafe to remain, and it
was thought advisable to suspend their missionary operations
among them. Mr. and Mrs. Allis are remnants of this noble band of
missionaries, and, still cherishing the desire, that these benighted
but very interesting people might be enlightened by the gospel, have,
while their fellow-laborers have long ago left for other fields of
usefulness, still lingered behind—and toiled on, amidst many self-
denials, privations and discouragements, in doing whatever lay in
their power for the good of these Indians. Lately the government has
established Fort Kearney, not far distant from their former villages,
which, it is hoped, will be a security against future incursions, and
prove a safeguard, when our mission will once be established
among them.
Language.—The Pawnee language is said to be altogether
different from the languages of the surrounding prairie tribes. The
Otoes, the Ioways, the Osages, the Kanzas or Caws, the Omahaws,
the Puncaws, etc., seem all to speak dialects of the same language,
the Dakota; while the Pawnee language seems, by its great
difference, to point back to the earliest periods of the residence of
the Indians in this country, when a disruption may have taken place,
that formed them into a distinct nation.
Population, Lodges, etc.—The lower village consists of about 80
lodges, with a population of nearly 2,500; and in the upper village
there are between 140 and 150 lodges, the population amounting
perhaps to 3,500. On approaching a village, the lodges have the
appearance of so many small hillocks, of a conical form, huddled up
together in the closest possible manner, with only narrow passages
between for walking, and the rest of the space filled up by pens,
formed of stakes, for confining their ponies during the night, to guard
them from being suddenly taken off by a warlike party of another
tribe.
The Pawnee lodges are of a circular form, large and spacious in
the interior; many of them being 50 feet in diameter. Three and
sometimes four circular rows of forked trunks of trees are placed
upright, at appropriate distances from each other. The row nearest
the centre consists of only four such upright timbers, about 15 or 20
feet high, while the crotches in the more exterior rows are shorter
and more numerous, in proportion as the circumference is greater.
These forks or crotches support thick crossbeams, upon which a
frame of long poles is laid, extending from the ground at the outer
circumference of the lodge to the top, leaving only an opening at the
apex, of about four feet in diameter, to answer the double purpose of
letting in the light, and letting out the smoke. Upon the frame work of
poles, willow osiers are laid, and the whole is then covered with
prairie-sod from 12 to 18 inches thick. Immediately below the
opening above, a hole is sunk in the centre for the fire-place,
common to all the residents of the lodge. From five to ten families,
generally related together, have a common occupancy of one lodge,
governed by a head man, who may be styled the lodge chief. Around
the circumference of the lodge are recesses for sleeping, partitioned
off for each family, resembling the berths on board of steamboats,
many of which are screened in front and on the sides by willow-twigs
laid above each other, tied fast to a frame, which, partly with the
reddish bark on, and partly white from having the bark taken off,
exhibit considerable taste in those who wrought them. When thus
ornamented with twigs, a small opening about two by three feet is
left in front to admit the occupants. The bottom of the berth is raised
about two feet above the ground by means of large hewn sills,
overlaid by thick willow twigs, which are then covered with buffalo-
robes. The entrance of the lodge is always on the East side,
protected by a passage, closed above and on the sides, of about 15
feet in length—the door being a large buffalo robe, or several sewed
together, hanging before the inner entrance. On the side opposite to
the door of each lodge, a recess is reserved, for depositing the skull
of a buffalo, surmounted by shields, quivers of arrows, spears, bows,
skins, feathers, etc. used for hunting, for medicinal or religious
purposes, as the case may require. In the intermediate space
between the recesses and the fireplace, mats, about three by five
feet, made of rushes, are laid, at convenient distances, for seats;
while an extra supply of them, rolled up, and set aside at different
places in the lodge, are reserved for extraordinary occasions, as for
instance councils or feasts.
Subsistence.—What the seal is to the Greenlander the buffalo is
to the Pawnees and other Prairie Indians; and many of their songs,
in which reference is made to the buffalo, show that this animal is
held in high estimation among them. It will no doubt be a difficult
undertaking to wean them from an occupation, which is at the same
time a gratifying and exciting sport to them, and which imparts to an
individual who distinguishes himself in its pursuit, a character of high
standing among his tribe. The great scarcity of the buffalo, however,
of late years, since the immense emigration to the far west, has
pinched them with want and hunger, and it is evident that they
cannot subsist much longer by depending mainly upon this animal as
heretofore. This circumstance, though calling forth our warmest
sympathies in behalf of their wretched condition, may perhaps be the
means, in the hands of an Allwise Providence, of shaking that
tenacity and attachment so strongly developed in the Indian
character, for long cherished customs, and making them more
pliable in adopting the arts of civilization. Their attention must soon
be directed to agriculture and the raising of stock, or they must
starve.
While on the hunt, in the buffalo country, the Pawnees generally
have a good supply of fresh meat to subsist on. That portion of their
meat which is intended to be jerked, in order to take home with them,
they cut into narrow slips, and dry it over the fire, without any salt,
where, by the action of the smoke and sun, it soon dries. Several
slips are then plaited together, when it is put away into a skin, and
reserved for future use. The reason why no salt is added is probably,
first, because it is a scarce article, and secondly, because anything
that is salted and dried, imbibes moisture in damp weather, and
sooner becomes rancid than meat dried without salt.
Besides the buffalo, as their main subsistence, they raise some
corn, beans, and pumpkins. As they use no other agricultural
implements than hoes, their fields are not very extensive. For
suitable spots of cultivation they generally select the mouth of a
ravine, or any spot where, by the washing of the rains, the ground
has become loose and mellow, and consequently the sod may more
easily be extirpated than in the prairies generally, where the ground
can only be prepared by turning the thick sod by means of a large
prairie plough, and three or four yoke of oxen.
Their fields are not enclosed by fences or any other kind of
protection. Having no other stock but horses, which are constantly
herded and watched during the day time, and shut up in enclosures
in the village during the night, fences are unnecessary. While absent
from their homes, their fields are subject to depredations from prairie
wolves and deer, which however no ordinary fence could restrain.
Because these poor people have no other agricultural implements
than hoes, the spots which they are obliged to select for fields are
often at great distances from each other, and frequently from five to
eight miles from their village. When abroad, to prepare and plant
them in the spring, and gather the corn in the fall, they are often
exposed to attacks of their enemies. While the husband is watching
from some neighboring eminence to guard against the stealthy
approach of any hostile force, the wive is engaged in the labor of the
field. With fear and trembling their field-labor is thus performed, and
many a one, while so employed, is suddenly fallen upon and killed
by a marauding party of enemies.
When we visited them, they particularly requested us “to beg their
Great Father, the President, that he should be so kind and again
break up some ground for them, as he had done in former years,
that they might be able to plant more corn.” We have brought in the
petition of these destitute people before the proper Department at
Washington, and it is greatly to be desired that our benevolent
Government may do something for them in their wretched state.
As has already been remarked, they were in an almost starving
condition when we visited them. The hunt had proved unsuccessful,
so that in the lower village they had no meat whatever, and had to
depend upon the little corn that they had raised the preceding year.
In the upper village they were also in a miserable condition, for,
though they had yet a little dried buffalo-meat, the Sioux had during
their absence on the hunt, destroyed their village (their present
lodges had been rebuilt since their return) and carried off a portion of
their corn, burnt another portion, and thus very little remained
concealed in the “caches,” which are made in their lodges.
Hospitality.—The Indian has always been renowned for his
hospitality. This trait of character is noticeable among all the tribes.

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Intermediate Accounting Volume 2

Canadian 7th Edition Beechy Solutions

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*W The solution to this assignment is on the text website, Connect.

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Case 17-1 Water Tours Limited

Accounting policy must be considered for:

Analysis and Recommendations

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4. Storm damage - unusual gain

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6. Related party transaction

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Analysis and Conclusions

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Term Preferred Shares

Share Issue Costs

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Net income prior to adjustments .........................................$24,000,000

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Analysis and Conclusions

Loss Carryforward/Deferred Tax Asset

The following factors support it would be probable.

• This is the first loss in ten years.

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The following factors support it would not be probable.

• Earnings have been declining over the past several years.

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Technical Review 17-1

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The amount of the loss carryforward is $1,500,000 – $930,000 = $570,000.

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The amount of loss that is a carryforward is $1,000,000 ($3,500,000 - $2,500,000)

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Taxable income: 20x7 20x8

The entry (not required) :

Income tax receivable .................................................................21,250

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Taxable income: 20x7 20x8

The LCF is ($400,000 - $130,000) or $270,000

Taxable income: 20x7 20x8

The LCF is ($280,000 - $210,000) or $70,000

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Taxable income: 20x7 20x8

Income tax receivable .................................................................22,000

Taxable income: 20x7 20x8

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DT Table (proof of $18,000 debit adjustment)

(in 000’s) Tax Accounting Difference DT Opening

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Income tax expense ($720,000 x 0.30) ........................................216,000

Income tax expense ($880,000 x 0.30) ........................................264,000

Income tax receivable ($600,000 x 0.30) + ($880,000 x 0.30) ...444,000

LCF: $1,120,000 ($2,600,000 - $880,000 - $600,000)

Income tax expense ($280,000 x 0.35) ........................................98,000

LCF: $840,000 ($1,120,000 - $280,000)

Income tax expense ($1,000,000 x 0.35) .....................................350,000

LCF: 0 ($840,000 - $840,000)

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Tax Accounting Difference DT Opening

Impact of change in tax rate on opening balance ($100,000 x 0.02) $ 2,000

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