Assume the President signs a stimulus package permitting businesses to expense $250,000 of equipment purchases in the current tax year, provided total equipment purchases do not exceed $750,000. Assume the ABC corporation purchased a machine for $500,000 during the qualifying time period. The machine has a 7-year MACRS life and a 10-year straight line write-off for financial accounting purposes. a. What is the deferred tax liability balance for Years 1, 5, and 9, assuming a 35- percent marginal tax rate? b. What is the journal entry to record the deferred tax benefit in Years 1, 5 and 9?
Assume the President signs a stimulus package permitting businesses to expense $250,000 of equipment purchases in the current tax year, provided total equipment purchases do not exceed $750,000. Assume the ABC corporation purchased a machine for $500,000 during the qualifying time period. The machine has a 7-year MACRS life and a 10-year straight line write-off for financial accounting purposes. a. What is the deferred tax liability balance for Years 1, 5, and 9, assuming a 35- percent marginal tax rate? b. What is the journal entry to record the deferred tax benefit in Years 1, 5 and 9?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6

Transcribed Image Text:Assume the President signs a stimulus package permitting businesses to expense
$250,000 of equipment purchases in the current tax year, provided total
equipment purchases do not exceed $750,000. Assume the ABC corporation
purchased a machine for $500,000 during the qualifying time period. The machine
has a 7-year MACRS life and a 10-year straight line write-off for financial
accounting purposes.
a. What is the deferred tax liability balance for Years 1, 5, and 9, assuming a 35-
percent marginal tax rate?
b. What is the journal entry to record the deferred tax benefit in Years 1, 5 and 9?
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