On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $ \$ 36 $ million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100 % of the equipment's costfor income tax reporting in 2021. At December 31, 2023, the book value of the equipment was $\$ 30 $ million. At December 31, 2024, the book value of the equipment was $\$ 28 $ million. There were no other temporary differences andno permanent differences. Pretax accounting income for 2024 was $\$ 50 $ million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of $ 25 \% $. 2. What is Ameen's2024 net income?

Taxable Income = Pre-tax accounting income + Excess of book depreciation over tax…

On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $ \$ 36 $ million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100 % of the equipment's cost for income tax reporting in 2021. At December 31, 2023, the book value of the equipment was $\S 30 million. At December 31, 2024, the book value of the equipment was \(\S 28 $ million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $\$ 50 $ million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of $ 25 \ 96 $. 2. What is Ameen's 2024 net income?

On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $ \$ 36 $ million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100 % of the equipment's cost for income tax reporting in 2021. At December 31, 2023, the book value of the equipment was $\S 30 million. At December 31, 2024, the book value of the equipment was \(\S 28 $ million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $\$ 50 $ million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of $ 25 \ 96 $. 2. What is Ameen's 2024 net income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

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On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $ \$ 36 $ million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100 % of the equipment's cost
for income tax reporting in 2021. At December 31, 2023, the book value of the equipment was $\$ 30 $ million. At December 31, 2024, the book value of the equipment was $\$ 28 $ million. There were no other temporary differences and
no permanent differences. Pretax accounting income for 2024 was $\$ 50 $ million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of $ 25 \% $. 2. What is Ameen's
2024 net income?

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