On January 1, Year 1, a company purchased major pieces of manufacturing equipment for a total of $60 million. Thecompany uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. AtDecember 31, Year 3, the book value of the equipment was $54 million and its tax basis was $44 million. At December31, Year 4, the book value of the equipment was $52 million and its tax basis was $37 million. There were no othertemporary differences and no permanent differences. Pretax accounting income for Year 4 was $45 million.Required:1. Prepare the appropriate journal entry to record the company's Year 4 income taxes. Assume an income tax rate of25%.2. What is the company's Year 4 net income?Complete this question by entering your answers in the tabs below.Required 1Required 2Prepare the appropriate journal entry to record the company's Year 4 income taxes. Assume an income tax rate of 25%.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your an:millions rounded to 2 decimal place (i.e., 10,000,000 should be entered as 10.00).View transaction listJournal entry worksheet1Record Year 4 income taxes.Note: Enter debits before credits.EventGeneral JournalDebitCredit1Income tax expense11.25Deferred tax liabilityIncome tax payableRecord antesClear antnu.View general inurnal

On January 1, Year 1, a company purchased major pieces of manufacturing equipment for a total of $60 million. The company uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, Year 3, the book value of the equipment was $54 million and its tax basis was $44 million. At December 31, Year 4, the book value of the equipment was $52 million and its tax basis was $37 million. There were no other temporary differences and no permanent differences. Pretax accounting income for Year 4 was $45 million. Required: 1. Prepare the appropriate journal entry to record the company's Year 4 income taxes. Assume an income tax rate of 25%

On January 1, Year 1, a company purchased major pieces of manufacturing equipment for a total of $60 million. The company uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, Year 3, the book value of the equipment was $54 million and its tax basis was $44 million. At December 31, Year 4, the book value of the equipment was $52 million and its tax basis was $37 million. There were no other temporary differences and no permanent differences. Pretax accounting income for Year 4 was $45 million. Required: 1. Prepare the appropriate journal entry to record the company's Year 4 income taxes. Assume an income tax rate of 25%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $840,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $960,000, which includes interest revenue of $28,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%. Prepare the journal entry to record income taxes. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 1 Record the income tax expense. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Income tax expense Deferred tax liability Income tax payable
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