EMC began operations during 2004. Taxable income in 2005 was $829,000. Basis differences as of 12/31/04 and 12/31/05 are as follows: Description of difference 12/31/04 12/31/05 Property, Plant, & Equipment, net: GAAP basis $1,102,000 $1,880,000 Tax basis 1,000,000 1,800,000 Basis difference $102,000 $80,000 Investments – Trading GAAP basis (fair value) $785,000 $823,000 Tax basis (cost or amortized cost) 903,000 948,000 Basis difference ($118,000) ($125,000) The enacted income tax rate is 40% for 2004 and all future years. Requirement: Prepare the income tax journal entries that EMC should make for the year ended 12/31/05.
- EMC began operations during 2004. Taxable income in 2005 was $829,000. Basis differences as of 12/31/04 and 12/31/05 are as follows:
Description of difference 12/31/04 12/31/05
Property, Plant, & Equipment, net:
GAAP basis $1,102,000 $1,880,000
Tax basis 1,000,000 1,800,000
Basis difference $102,000 $80,000
Investments – Trading
GAAP basis (fair value) $785,000 $823,000
Tax basis (cost or amortized cost) 903,000 948,000
Basis difference ($118,000) ($125,000)
The enacted income tax rate is 40% for 2004 and all future years.
Requirement:
Prepare the income tax
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