b. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. DEF also recognized a $20,000 gain onequipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $30,000. DEF haddeducted $15,000 of tax depreciation on the equipment.Year1Book-taxDifference$ 12,000FavorableorTemporaryorUnfavorablePermanentUnfavorable ✔ Temporary ✔ Required information[The following information applies to the questions displayed below.]What book-tax differences in year 1 and year 2 associated with its capital gains and losses would DEF Inc. report in thefollowing alternative scenarios? Identify each book-tax difference as favorable or unfavorable and as permanent ortemporary.a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain onequipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF haddeducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000.Year 1Year 2Book-taxDifferenceFavorable or Temporary orUnfavorable Permanent

a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF had deducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000. Year 1 Year 2 Book-tax Difference Favorable or Temporary or Unfavorable Permanent

a. In year 1, DEF recognized a loss of $15,000 on land that it had held for investment. In year 1, it also recognized a $30,000 gain on equipment it had purchased a few years ago. The equipment sold for $50,000 and had an adjusted basis of $20,000. DEF had deducted $40,000 of depreciation on the equipment. In year 2, DEF recognized a capital loss of $2,000. Year 1 Year 2 Book-tax Difference Favorable or Temporary or Unfavorable Permanent

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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