salvage value. The depreciation schedule for GAAP and tax purposes follows. Year GAAP Depreciation Tax Depreciation Year 1 $100,000 Year 2 152,000 Year 3 148,000 Year 4 Year 5 $80,000 80,000 80,000 80,000 80,000 0 0 The tax rate for Year 1 through Year 3 is 25%, but a new law is passed in Year 1 that will raise the tax rate in Year 4 and thereafter to 30%. Pretax GAAP income equals $480,000 in Year 1 and Year 2. There are no other differences between pretax GAAP income and tax income. Required a. Record the income tax journal entry on December 31 of Year 1 (assuming the original tax depreciation schedule provided).

salvage value. The depreciation schedule for GAAP and tax purposes follows. Year GAAP Depreciation Tax Depreciation Year 1 $100,000 Year 2 152,000 Year 3 148,000 Year 4 Year 5 $80,000 80,000 80,000 80,000 80,000 0 0 The tax rate for Year 1 through Year 3 is 25%, but a new law is passed in Year 1 that will raise the tax rate in Year 4 and thereafter to 30%. Pretax GAAP income equals $480,000 in Year 1 and Year 2. There are no other differences between pretax GAAP income and tax income. Required a. Record the income tax journal entry on December 31 of Year 1 (assuming the original tax depreciation schedule provided).

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 1BD

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1. Pine Corporation’s books showed pretax income of P600,000 for the year ended December 31, 20x1. In the computation of federal income taxes, the following data were considered: Gain on involuntary conversion (expropriation) P350,000 Depreciation deducted for tax purposes in excess of depreciation deducted for book purposes 50,000 Estimated tax payments during 20x1 70,000 Income tax rate 30% What amount should Pine report as its current income tax liability on its December 31, 20x1, balance sheet?
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Calculating Deferred Tax Balance Evergreen Company’s reconciliation between pretax GAAP income and taxable income follows for the year. Pretax GAAP income $200,000 Depreciation adjustment (40,000) Permanent difference 1,250 Taxable income $161,250 The company had one temporary difference due to the GAAP basis of equipment exceeding the tax basis of equipment. Record the income tax journal entry for the year, assuming a tax rate of 25%. Assume that the January 1 deferred tax liability balance was $5,000. ● Note: Round amounts to the nearest whole dollar.
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