Financial Account Liberty Contractors records depreciation of $50,000 per year for threeyears. For tax purposes, the company has the following schedule ofdepreciation expense:=Year 1 $62,000Year 2 $50,000=Year 3 = $38,000Assume that each year Liberty makes $120,000 of income beforedepreciation expense and that the company has a 40% effective tax rate.What is the amount of tax expense, tax liability, and deferred tax liabilityfor Year 2?

Given DataDepreciation (Book): $50,000 per yearDepreciation (Tax):Year 1: $62,000Year 2: $50,000Year…

Answered: Liberty Contractors records…

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

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter15: Choice Of Business Entity—other Considerations

Section: Chapter Questions

Problem 72P

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Grevilla Corporation is a manufacturing company. The corporation has accumulated earnings of $950,000, and it can establish reasonable needs for $400,000 of that amount. Calculate the amount of the accumulated earnings tax (if any) that Grevilla Corporation is subject to for this year. $_____________
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General Accounting
A hospitality corporation is preparing its annual reports. The accounting records show sales of $250,000, and expenses, excluding depreciation, at $175,000. The company elects to use different depreciation methods for financial and tax reporting purposes. Depreciation for accounting purposes is $40,000, and for tax purposes the depreciation expense is $65,000. Compute the income before income taxes on the financial statements and the taxable income on the income tax return.
Stone Company reported pre-tax book income of $700,000 in 20X1, the first year of operation. The tax depreciation exceeded the book depreciation by $90,000. The tax rate for 20X1 and all future years was 21%. What amount of deferred tax liability should Stone report in its December 31, 20X1, balance sheet? Select one: a. $6,300 b. $14,000 c. $18,900 d. $3,500
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Martin Ltd, in the first year of its operations, reported the following information regarding its operations: a. Earnings before tax for the year was $2,500,700 and the tax rate was 38% b. Depreciation was $240,700, and CCA was $134,700. Net book value at year-end was $1,680,700, while UCC was $1,786,700. c. The warranty program generated an estimated cost (expense) on the statement of profit and loss of $514,700 but the cash paid out was $348,700. The $166,700 liability resulting from this was shown as a current liability. On the income tax return, the cash paid is the amount deductible. d. Golf club dues of $30,700 were included in the statement of profit and loss but were not allowed to be deducted for tax purposes. In the second year of its operations, Martin Ltd. reported the following information: a. Earnings before income tax for the year was $2,750,700, and the tax rate was 40%. b. Depreciation was $240.700, and the CCA was $740,700. Net book value at year-end was $1,440.700,…
Goose Industries faces the following tax schedule. Last year the company realized $15,000,000 in operating income (EBIT). Its annual interest expense is $7,500,000. (1) Compute the company’s income taxes payable? Use the tax rate table below. (2) What was the company’s net income for the year? If a corporation's taxable income is It pays this amount on the base of the bracket Plus this percentage on the excess over the base (marginal rate) Average tax rate at top of bracket Up to $50,000 $0 15% 15.0% $50,000 – $75,000 $7,500 25% 18.3% $75,000 – $100,000 $13,750 34% 22.3% $100,000 – $335,000 $22,250 39% 34.0% $335,000 – $10,000,000 $113,900 34% 34.0% $10,000,000 – $15,000,000 $3,400,000 35% 34.3% $15,000,000 – $18,333,333 $5,150,000 38% 35.0% Over $18,333,333 $6,416,667 35% 35.0% (1) $2,436,000 (2) $4,950,000 (1) $2,550,000 (2) $4,950,000 (1) $2,550,000 (2)…
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Estimate the gross income for Bling Enterprises, which reports a CFAT of $2.5 million, $900,000 in expenses, $900,000 in depreciation charges, and has an effective tax rate of 26.4%.
Venus Ltd has acquired machinery worth of Rs. 1000 million. The company provides 10% depreciation under straight-line-method of depreciation for preparing Income Statement. For computing tax, it provides 15% depreciation under Written-down-value (WDV) method. If tax rate is 30%, the deferred tax amount in the first year is equal to: Rs. 15 million Rs. 45 million Rs. 50 million Rs. 30 million

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