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SWFT Corp Partner Estates Trusts

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter14: Taxes On The Financial Statements

Section: Chapter Questions

Problem 24CE

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Can you please give me true answer this accounting question?

Kara Fashions uses straight-line depreciation for financial
statement reporting and MACRS for income tax reporting. Three
years after its purchase, one of Kara's buildings has a carrying
value of $400,000 and a tax basis of $300,000. There were no other
temporary differences and no permanent differences. Taxable
income was $4 million and Kara's tax rate is 40%. What is the
deferred tax liability to be reported in the balance sheet?

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Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara’s buildings has a book value of $400,000 and a tax basis of $300,000. There were no other temporary differences and no permanent differences. Taxable income was $4 million and Kara’s tax rate is 25%. What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $20,000 the previous year, prepare the appropriate journal entry to record income taxes this year.
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