Liberty Contractors records depreciation of $50,000 per year for three years. For tax purposes, the company has the following schedule of depreciation expense: = Year 1 $62,000 Year 2 $50,000 = Year 3 = $38,000 Assume that each year Liberty makes $120,000 of income before depreciation expense and that the company has a 40% effective tax rate. What is the amount of tax expense, tax liability, and deferred tax liability for Year 2?
Liberty Contractors records depreciation of $50,000 per year for three years. For tax purposes, the company has the following schedule of depreciation expense: = Year 1 $62,000 Year 2 $50,000 = Year 3 = $38,000 Assume that each year Liberty makes $120,000 of income before depreciation expense and that the company has a 40% effective tax rate. What is the amount of tax expense, tax liability, and deferred tax liability for Year 2?
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 72P
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Transcribed Image Text:Liberty Contractors records depreciation of $50,000 per year for three
years. For tax purposes, the company has the following schedule of
depreciation expense:
=
Year 1 $62,000
Year 2 $50,000
=
Year 3 = $38,000
Assume that each year Liberty makes $120,000 of income before
depreciation expense and that the company has a 40% effective tax rate.
What is the amount of tax expense, tax liability, and deferred tax liability
for Year 2?
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