None On July 1, 2023, Lorty Inc. sells equipment for $126,000. The capital cost of the equipment is $111,000and the carrying value for accounting purposes is $93,000. For equipment was included in Class 8. TheUCC balance in the class on January 1, 2023 was $103,000. There were no other additions ordispositions to the class during the taxation year ending December 31, 2023. Indicate the reconciliationadjustments that would be required to Lorty Inc.'s accounting income for 2023.

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Answered: On July 1, 2023, Lorty Inc. sells…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter12: Corporations: Organization, Capital Structure, And Operating Rules

Section: Chapter Questions

Problem 42P

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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?
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2019. Gross receipts were 300,000. The following expenses were incurred and paid as indicated: Because the coliseum was not scheduled to be used again until January 15, the company with which Duck had contracted did not perform the cleanup until January 810, 2020. a. Calculate Ducks net income from the concert for tax purposes for 2019. b. Using the present value tables in Appendix H, what is the true cost to Duck if it had to defer the 100,000 deduction for the performers until 2020? Assume a 5% discount rate and a 21% marginal tax rate in 2019 and 2020.
A company acquired an asset for $1,200,000 in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 19%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: Asset's Cost Useful life Enacted tax rate Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income Required: Cumulative Temporary Difference Deferred Tax Liability Jan. 1, 2024 $1,200,000 $0 0 4 years 19% 2024 $3,700,000 300,000 (399,960) $3,600,040 2025 $4,100,000 300,000 (533,400) $3,866,600 For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Each cell requires a formula, even if the result is $0. 2026 $4,400,000 300,000…
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Ex and Why Company commenced operations on January 1, 2019. It purchased a machine for P200,000. The machine is being depreciated on a straight line basis over 5-year life, for income tax purposes under double declining balance method. The company capitalizes product development expenditure in the amount of P120,000 in accordance with PAS 38., for income tax purposes, such expenditure is claimed in the year it is incurred. For the year ended December 31, 2019, the company made a profit before tax of P500,000. This profit was after deducting general allowance for bad debts of P50,000 and provision for warranties of P80,000. At year end, the balance of the gross trade receivable account was P300,000. For income tax purposes tax rate is at 32% a. What amount of deferred tax asset should the company have recognized in 2019? b. What amount of deferred liability asset should the company have recognized in 2019?
On January 1, 2019, KRIS KRINGLE Company purchased a ₱600,000 machine, with a five-year useful life and no residual value. The machine was depreciated by an accelerated method for book and tax purposes. The carrying amount was ₱240,000 on December 31, 2020. On January 1, 2021, the entity changed to the straight-line method for financial reporting purposes. The income tax rate is 30%. On January 1, 2021, what amount should be reported as deferred tax liability as a result of the change? a. 120,000 b. 72,000 c. 36,000 d. 0
Copper Corporation sold machinery for $47,000 on December 31, 2021. The machinery had been purchased on January 2, 2018, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2021, what should Copper report? a.Ordinary income of $6,000. b.A § 1231 gain of $6,000. c.A § 1231 gain of $3,000 and $3,000 of ordinary income. d.A § 1231 gain of $6,000 and $3,000 of ordinary income.
Ayres Services acquired an asset for $96 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income $ 480 $ 500 $ 515 $ 550 Depreciation on
Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income Required: 2024 $ 330 20 (25) $325 Cumulative Temporary Difference Deferred Tax Liability ($ in millions) 2025 $350 20 (33) $337 2026 $365 20 (15) $370 $413 Beginning of 2024 2027 $ 400 For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000…
s
On January 2, 2018, Orenge Corporation purchased equipment for $300,000 with an ADS recovery period of 10 years and a MACRS useful life of 7 years. Section 179 was not elected. MACRS depreciation properly claimed on the asset, including depreciation in the year of sale, totaled $79,605. The equipment was sold on July 1, 2019, for $290,000. As a result of the sale, the adjustment to taxable income needed to arrive at current E & P is: a. No adjustment is required. b. Decrease $49,605. c. Increase $49,605. d. Decrease $79,605. e. None of the above. Please explain step by step ?
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