Assume that Maddox Corporation buys new equipment for $15,000 on January 1, 2021. Depreciation for bookpurposes using the SL method is $3,000 per year. For tax purposes SYD is used with depreciation of $5,000 in2021 and $4,000 in 2022. Depreciation is the only book - versus - tax difference. Income before depreciation andtaxes is $30,000 each year over the next five years and the statutory tax rate is 35% for 2021. The tax rateincreased to 40% in 2022. Calculate the increase in the deferred tax liability for 2022.Multiple choice question.$1,200$250$700$500

Given the information:Book depreciation per year = $3,000 (Straight-Line (SL) Method)Tax…

Answered: Assume that Maddox Corporation buys new…

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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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?
In March 2022, Jones Company purchased a Mercedes for use in its business at a cost of $73,000. Required: Assuming no bonus depreciation or Section 179 deduction, calculate the allowable tax depreciation on this asset for 2022, 2023, and 2024. Use Table 7-1 and Table 7-2. Use the below table for annual depreciation deduction for year 2022 to 2025: 2022 2023 2024 2025 and subsequent years 2022 depreciation 2023 depreciation 2024 depreciation Amount $ 11,200 18,000 10,800 6,460
Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax purposes as follows: year 1, $329,000; year 2, $189,000; and in each of years 3 through 5, $109,000 per year. A 10 percent discount rate is appropriate for this asset, and the company’s tax rate is 20 percent. Required: Compute the present value of the tax shield resulting from depreciation. 2. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($169,000 per year).
A has an investment property acquired at a cost of P2,000,000. Depreciation is estimated to be P50,000 annually and a periodic repair costs of P15,000 per year as well as property tax of P5,000 are incurred by the company on an annual basis. The fair value of the investment property before taxes and repairs amounts to P2,100,000 at year end. What is the carrying value of A's investment property on December 31, 2021 considering that the fair value model is used?
On May 7, 2021, Jimin Corporation sold a tract of land for P70,000 that resulted in a P30,000 gain on the sale. PTD agreed to accept one payment of P35,000 on August 15 and a second payment of P35,000 on December 15. PTD had a calendar year-end. What amount of gain was reported during the second, third, and fourth quarters of the year from this sale?
Doug Smith Industries purchased warehouses for $121 million (no residual value) at the beginning of 2021. The warehouses were being de year life using the sum-of-the-years'-digits method. At the beginning of 2024, management decided to change to straight-line. Ignoring tax entry will include a debit to depreciation expense of: Note: Round your answer to 2 decimal places. 3:20 Multiple Choice $12.10 million. $8.80 million. $61.60 million. $59.40 million.
7. Several years ago, Pentair purchased equipment for $23,500,000. Pentair uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $21,150,000 and its tax basis was $17,625,000. At December 31, 2021, the carrying value of the equipment was $18,800,000 and the tax basis was $12,925,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $28,500,000. A tax rate of 25% applies to all years. Required:Prepare the journal entry to record Pentair's income tax expense for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% is in effect for all years.For an asset that cost $11,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different methods is as follows: Year Straight Line SYD Difference 2019 $ 1,000 $ 1,818 $ 818 2020 1,000 1,636 636 $ 2,000 $ 3,454 $ 1,454 Required:1. Prepare the journal entry that Faulkner will record in 2021 related to the change.2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years’- digits in 2021. Prepare the journal entry that Faulkner will record in 2021 related to the change. Please…
.(BE 18-7) Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2020. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses straight-line depreciation over five years. The enacted tax rate is 25% for all years. This depreciation difference is the only reversing difference the company has. (a) Calculate the amount of capital cost allowance and depreciation expense from 2020 to 2024, as well as the corresponding balances for the carrying amount and undepreciated capital cost of the depreciable assets at the end of each of the years 2020 to 2024. Assume that these assets are considered "eligible equipment" for purposes 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 nearest dollar. (b) Determine the amount of deferred taxes that should be reported in the SFP for…
In March 2020, Jones Company purchased a Mercedes for use in its business at a cost of $73,000. Required: Assuming no bonus depreciation or Section 179 deduction, calculate the allowable tax depreciation on this asset for 2020, 2021, and 2022. Use Table 7-1 and Table 7-2. Use the below table for annual depreciation deduction for year 2020 to 2022: 2020...$ 10,100 2021... 16,100 2022... 9,700 2023 and subsequent years... 5,760 * Refer to attached images for Table 7-1 and Table 7-2

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