Prance, Inc., earns pretax book net income of $1,601,000 in 2019. Prance acquires a depreciable asset in 2019, and first-year tax depreciation exceeds book depreciation by $160,100. In 2020, Prance reports $1,120,700 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $40,025. Prance reports no other temporary or permanent book-tax differences. Assume the pertinent U.S. Federal corporate income tax rate is 21% and Prance earns an after-tax rate of return on capital of 8%. Enter below the 2020 Prance's deferred tax expense and any deferred tax asset or liability. If an amount is zero, enter "0". If required, round your answer to nearest whole value. a. b. Deferred tax asset account balance Deferred tax liability account balance 0 25,216 c. In net present value terms, what has been the value to Prance of accelerating $40,025 of 2020 book depreciation to 2019? The present value factor at 8% is 0.9259.
Prance, Inc., earns pretax book net income of $1,601,000 in 2019. Prance acquires a depreciable asset in 2019, and first-year tax depreciation exceeds book depreciation by $160,100. In 2020, Prance reports $1,120,700 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $40,025. Prance reports no other temporary or permanent book-tax differences. Assume the pertinent U.S. Federal corporate income tax rate is 21% and Prance earns an after-tax rate of return on capital of 8%. Enter below the 2020 Prance's deferred tax expense and any deferred tax asset or liability. If an amount is zero, enter "0". If required, round your answer to nearest whole value. a. b. Deferred tax asset account balance Deferred tax liability account balance 0 25,216 c. In net present value terms, what has been the value to Prance of accelerating $40,025 of 2020 book depreciation to 2019? The present value factor at 8% is 0.9259.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Godo
Subject: acounting
Transcribed Image Text:Exercise 14-15 (Algorithmic) (LO. 1, 4)
Prance, Inc., earns pretax book net income of $1,601,000 in 2019. Prance acquires a depreciable asset in 2019, and first-year tax
depreciation exceeds book depreciation by $160,100.
In 2020, Prance reports $1,120,700 of pretax book net income, and the book depreciation exceeds tax depreciation that year by $40,025.
Prance reports no other temporary or permanent book-tax differences. Assume the pertinent U.S. Federal corporate income tax rate is 21%
and Prance earns an after-tax rate of return on capital of 8%.
Enter below the 2020 Prance's deferred tax expense and any deferred tax asset or liability.
If an amount is zero, enter "0". If required, round your answer to nearest whole value.
a.
$
b.
Deferred tax asset account balance
Deferred tax liability account balance
25,216
c. In net present value terms, what has been the value to Prance of accelerating $40,025 of 2020 book depreciation to 2019? The present
value factor at 8% is 0.9259.
23,347 X
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