Provide correct answer general accounting question During the current tax year, ABC Manufacturing sells machinery for$450,000. The machinery originally cost $390,000 when purchased andplaced in service 3 years ago, and $85,000 of depreciation deductionswere allowed. The result of the sale is:a. Ordinary income of $145,000.b. Sec. 1231 gain of $145,000.c. Ordinary income of $85,000 and a long-term capital gain of $60,000.d. Ordinary income of $85,000 and Sec. 1231 gain of $60,000.

Step 1: Define Section 1245 RecaptureSection 1245 property includes depreciable personal property…

Answered: During the current tax year, ABC…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 44P

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Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year. Turnip uses differing depreciation methods for financial reporting and income tax purposes. The depreciation expense during the current year for financial reporting is 1,000 and for income tax purposes is 2,000. Turnip is subject to a 30% enacted future tax rate. Prepare a schedule to compute Turnips (a) ending future taxable amount, (b) ending deferred tax liability, and (c) change in deferred tax liability (deferred tax expense) for the current year.
Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
Cox Construction, a company in its 10th year of business, purchased a piece of equipment on April 1, year 9, for 20,000. Cox has used it for business purposes since the initial purchase date. The company depreciated the equipment using the MACRS half-year table for 5-year assets. For tax purposes, what is the amount of accumulated depreciation expense for the equipment as of December 31, year 10? a. 6,000 b. 10,400 c. 11,600 d. 12,800
At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.
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Several years ago, PTR purchased business equipment for $50,000. PTR’saccumulated book depreciation with respect to the equipment is $37,200, and itsaccumulated tax depreciation is $41,000.Required:a.Compute PTR’s book and tax basis in the equipment.b. Using a 21 percent tax rate, compute PTR’s deferred tax asset or liability (identifywhich) resulting from the difference between accumulated book and taxdepreciation.c. Compute PTR’s book and tax gain if it sells the equipment for $14,750.
Shockers Corp. acquires an asset for $200,000 which they estimate 3 years as the service life. For any taxable income, Shockers Corp uses a tax rate of 50%. a)Given double declining balance depreciation method, calculate the deprecation rateand then the depreciation amounts for year 1 through 3. How much tax will this corporation pay and what will be the ATCF for each of the following scenarios for the given year? b) After 3 years the asset is sold for$80,000? c) After 2 years the asset is sold for $300,000? d) After one year the asset is sold for $20,000?
What is the taxable income? for this accounting question
1. A special manufacturing and handling device was purchased by Alfonso Manufacturing for $200,000 and is depreciated over MACRS. CFBT is estimated to amount to $800,000 for the first 2 years followed by $600,000 thereafter until the asset is retained. The effective tax rate, Te is 35% and interest is 10% per year. In present worth dollars determine the CFAT and determine if it was a viable purchase. (Note answer must be in a tabular format)
Northwestern Export Services purchased some computers for $80,000 in Year 1. The equipment is depreciated for financial reporting purposes over 5 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 20%. Amounts for pretax GAAP accounting income, depreciation, and taxable income in Year 1, Year 2, Year 3, Year 4, and Year 5 are as follows: $ in thousands Year 1 Year 2 Year 3 Year 4 Year 5 Pretax accounting income $240 $195 $210 $285 $320 Depreciation on income statement 16 16 16 16 16 Depreciation on tax return (27) (35) (12) (6) 0 Taxable income $229 $176 $214 $295 $336 a) What type of book-tax difference is this? b) Prepare the appropriate journal entry related to the tax deferral ONLY at December 31, Year 1. (Note: The purchase of computers has already been recorded in Year 1.)Note: Round answers ($ in thousands) to the nearest whole number, if applicable. ($ in thousands)…
A distribution center purchased an equipment for $100,000 and has depreciated the equipment using the MACRS depreciation schedule as a 7-year property. The operating income in year 2 was $200,000 and the expenses were $87,000. If the company is in the 40% income tax bracket. i) What is the depreciation in year 2? $ ii) What is the taxable income in year 2? $ iii) What is the tax in year 2? $ iv) What is the book value of the equipment after year 2? $

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