A company acquired an asset for $1,200,000 in 2024. The asset is depreciated for financial reporting purposes over four years ona straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 19%.Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:Asset's CostUseful lifeEnacted tax ratePretax accounting incomeDepreciation on the income statementDepreciation on the tax returnTaxable incomeRequired:Cumulative Temporary DifferenceDeferred Tax LiabilityJan. 1, 2024$1,200,000$004 years19%2024$3,700,000300,000(399,960)$3,600,0402025$4,100,000300,000(533,400)$3,866,600For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) thebalance to be reported in the deferred tax liability account. Each cell requires a formula, even if the result is $0.2026$4,400,000300,000(177,720)$4,522,2802027$4,900,000300,000(88,920)$5,111,080Dec. 31, 2024 Dec. 31, 2025 Dec. 31, 2026Dec. 31, 2027

The deferred tax liability is created when the taxes to be paid as per income tax are greater than…

A company acquired an asset for $1,200,000 in 2024. 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 19%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: Asset's Cost Useful life Enacted tax rate $1,200,000 4 years 19%

A company acquired an asset for $1,200,000 in 2024. 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 19%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: Asset's Cost Useful life Enacted tax rate $1,200,000 4 years 19%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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