Requirement d and e only Daniel Company purchased an equipment costing P2,000,000accounting purposes, but uses sum-of-the-years' digit methoddepreciates this equipment using straight-line method foron January 1, 2022. The equipment has an estimated useful lifeon January 1, 2022. The equipment has an estimated useful lif,of four years, with no residual value.Daniel Companyfor tax purposes. Assume a 30% tax rate for all years.Daniel Company reports the following income in its income taxreturn for the years 2022, 2023, 2024 and 2025:P 800,000890,0001,200,0001,500,0002022202320242025Other than for the difference in depreciation for the equipmentdescribed, there isaccounting income and taxable income for years 2022, 2023,2024 and 2025.noother difference between Daniel'sREQUIRED:Compute for Daniel's pre-tax accounting profit for theyears 2022, 2023, 2024 and 2025.(a)(b)Compute for the balance of deferred tax liability at the endof 2022, 2023, 2024 and 2025.Prepare entries for current income taxes and deferredincome taxes for years 2022, 2023, 2024 and 2025.(c)Compute for the total income tax expense for years 2022,2023, 2024 and 2025.(d)(e)Compute the profit for years 2022, 2023, 2024 and 2025.

Depreciation is the method of assigning the cost of an tangible asset over its useful life. The more…

on January 1, 2022. The equipment has an estimated useful life Daniel Company purchased an equipment costing P2,000,000 Daniel Company of four years, with no residual value. depreciates this equipment using straight-line method for for tax purposes. Assume a 30% tax rate for all years. Daniel Company reports the following income in its income tay return for the years 2022, 2023, 2024 and 2025: 2022 2023 2024 P 800,000 890,000 1,200,000 1,500,000 2025 Other than for the difference in depreciation for the equipment described, there is no accounting income and taxable income for years 2022, 2023, 2024 and 2025. other difference between Daniel's REQUIRED: Compute for Daniel's pre-tax accounting profit for the years 2022, 2023, 2024 and 2025. (a) Compute for the balance of deferred tax liability at the end of 2022, 2023, 2024 and 2025. (b) Prepare entries for current income taxes and deferred income taxes for years 2022, 2023, 2024 and 2025. (c) Compute for the total income tax expense for years 2022. 2023, 2024 and 2025. (d) (e) Compute the profit for years 2022, 2023, 2024 and 2025.

on January 1, 2022. The equipment has an estimated useful life Daniel Company purchased an equipment costing P2,000,000 Daniel Company of four years, with no residual value. depreciates this equipment using straight-line method for for tax purposes. Assume a 30% tax rate for all years. Daniel Company reports the following income in its income tay return for the years 2022, 2023, 2024 and 2025: 2022 2023 2024 P 800,000 890,000 1,200,000 1,500,000 2025 Other than for the difference in depreciation for the equipment described, there is no accounting income and taxable income for years 2022, 2023, 2024 and 2025. other difference between Daniel's REQUIRED: Compute for Daniel's pre-tax accounting profit for the years 2022, 2023, 2024 and 2025. (a) Compute for the balance of deferred tax liability at the end of 2022, 2023, 2024 and 2025. (b) Prepare entries for current income taxes and deferred income taxes for years 2022, 2023, 2024 and 2025. (c) Compute for the total income tax expense for years 2022. 2023, 2024 and 2025. (d) (e) Compute the profit for years 2022, 2023, 2024 and 2025.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 5MC: At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial...

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Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Cox Construction, a company in its 10th year of business, purchased a piece of equipment on April 1, year 9, for 20,000. Cox has used it for business purposes since the initial purchase date. The company depreciated the equipment using the MACRS half-year table for 5-year assets. For tax purposes, what is the amount of accumulated depreciation expense for the equipment as of December 31, year 10? a. 6,000 b. 10,400 c. 11,600 d. 12,800
On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000
On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
Albany Corporation purchased equipment at the beginning of Year 1 for 75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.