.(BE 18-7) Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2020. For taxpurposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, thecompany uses straight-line depreciation over five years. The enacted tax rate is 25% for all years. Thisdepreciation difference is the only reversing difference the company has. (a) Calculate the amount ofcapital cost allowance and depreciation expense from 2020 to 2024, as well as the correspondingbalances for the carrying amount and undepreciated capital cost of the depreciable assets at the end ofeach of the years 2020 to 2024. Assume that these assets are considered "eligible equipment" forpurposes of the Accelerated Investment Incentive (under the All, instead of using the half-year rule,companies are allowed a first-year deduction using 1.5 times the standard CCA rate). Round to the nearestdollar. (b) Determine the amount of deferred taxes that should be reported in the SFP for each year from2020 to 2024.

The asset's original cost divided by its useful life yields straight-line depreciation. This is…

Answered: . (BE 18-7) Myers Corp. purchased…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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SINCO Ltd. purchased a piece of equipment in the year 2018 for the sum of $ 200,000. The company is subject to a tax depreciation rate of 25%. According to the following table, what is the depreciation allowance that this company can claim in 2020? (in the following picture : Année is year)
During 2021, Dud Co. purchases only one asset: equipment (7-year property) for $1,650,000. Dud takes the maximum Sec. 179 deduction and elects out of 100% bonus. In the table below, Compute the maximum tax depreciation for the machinery for 2021-2028, respectively. Answer in whole numbers only, with no decimals, no commas, and no dollar signs. Year 2021 2021 2022 2023 2024 2025 2026 2027 2028 total all years Depreciation Sec. 179 deduction amount (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
(25) In 2021, ABC Company had pretax income of $20,000. ABC depreciated an additional $4,000 on its tax report because ABC Company used accelerated depreciation on its tax report and straight-line on its accounting records. The excess depreciation will reverse evenly over the next two years. Also included in pretax income was a $1,000 fine for polluting its waterways located near its chemical plant. The enacted tax rates are: 2021 20%, 2022 30%, and 2023 35%. Calculate taxable income for ABC Company in 2021. (26) Use the information provided in question 25. What will be the dollar difference between the company’s tax expense and tax payable in 2022?
At the end of 2021, Schrutte Inc. in its first year of operations, had pretax financial income of $650,000. The company had extra depreciation taken for tax purposes in the amount of $975,000. Estimated expenses that were deducted for financial income but not yet paid amounted to $425,000. It is estimated that the expenses will be paid in 2022. The tax rate for all years is 25% In the journal entry at the end of the year that records income tax expense, deferred taxes and income taxes payable, what is the entry to the Income Tax Payable account? Question 19 options: a) credit Income Tax Payable account by $162,500 b) credit Income Tax Payable account by $300,000. c) credit to Income Tax Payable account by $25,000. d) credit Income Tax Payable account by $512,500.
On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2020, the book value of the equipment was $30 million and its tax basis was $20 million. At December 31, 2021, the book value of the equipment was $28 million and its tax basis was $12 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $50 million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen's 2021 net income?
Fore Farms reported a pretax operating loss of $204 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2022 $ 92 million 2023 $ 68 million Required: Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. Assume Fore will carry back its NOL to prior years. What is the net operating loss reported in 2024 income statement? Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $232 million. No…
Assume that Maddox Corporation buys new equipment for $15,000 on January 1, 2021. Depreciation for book purposes using the SL method is $3,000 per year. For tax purposes SYD is used with depreciation of $5,000 in 2021 and $4,000 in 2022. Depreciation is the only book - versus - tax difference. Income before depreciation and taxes is $30,000 each year over the next five years and the statutory tax rate is 35% for 2021. The tax rate increased to 40% in 2022. Calculate the increase in the deferred tax liability for 2022. Multiple choice question. $1,200 $250 $700 $500
On January 1, 2020, equipment costing $582,800 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.) In January 2021, $231,900 is collected in advance rental of a building for a 3-year period. The entire $231,900 is reported as taxable income in 2021, but $154,600 of the $231,900 is reported as unearned revenue in 2021 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2022 and 2023. The tax rate is 20% in 2020 and all subsequent periods. (Hint: To find taxable income in 2020 and 2021, the related income taxes payable amounts wilIl have to be "grossed up.") No temporary differences existed at the end of 2019. Kingbird expects to report taxable income in each of the next 5 years.
Ayres Services acquired an asset for $144 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset/s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: _ ($ in millions) ____________ 2021 2022 2023 2024 Pretax accounting income $370 $390 $405 $440 Depreciation on the income statement 36 36 36 36 Depreciation on the tax return (57) (49) (23) (15) Taxable income…
Milo Manufacturing uses straight-line depreciation for financial statement reporting and is able to deduct 100% of the cost of equipment in the year the equipment is purchased for tax purposes. Four years after its purchase, one of Milo's manufacturing machines has a book value of $740,000. There were no other temporary differences and no permanent differences. Taxable income was $24 million and Milo’s tax rate is 25%.What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $245,000 the previous year, prepare the appropriate journal entry to record income taxes this year.
14) The records for Ehrlich Co. show this data for 2021: Accrued revenue recorded on the books was $480,000. Revenue cash collections was $320,000. Life insurance on officers was $2,800. Fine for pollution violation was $1,000. Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, accelerated depreciation is used and Ehrlich may deduct 15% for 2021. Interest received on tax exempt Florida State bonds was $9,000. The estimated warranty liability related to 2021 sales was $23,000. Repair costs under warranties during 2021 were $12,000. Pretax financial income is $700,000. The tax rate is 25% for this and future years. Instructions (a) Prepare a schedule starting with pretax financial income and compute taxable income. (b) Prepare the journal entry to record income taxes for 2021. (c ) Show the income statement presentation of income tax expense, starting with "income before tax"
Fore Farms reported a pretax operating loss of $176 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Taxable income in Fores’s two previous years of operation was as follows: 2022 $ 80 million 2023 $ 56 million Prepare the journal entry to record income taxes in 2025 assuming pretax accounting income is $208 million. No additional temporary differences originate in 2025.

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