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?

Step-by-Step SolutionGiven:Book Depreciation: $50,000 per year.Tax Depreciation for Year 2:…

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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General Accounting
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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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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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