Question 6Happy Mart Sdn Bhd acquired an equipment in Year 2016 for RM100,000 anddepreciates it on a straight-line basis over its expected useful life of five years. Theequipment has no residual value. For tax purposes, the equipment is depreciated at25% per annum on a straight-line basis. Tax losses may be carried back againsttaxable profit of the previous five years. In year 2015, the entity's taxable profit wasRM25,000. The tax rate is 20%.Required:-Assuming nil profits/losses after depreciation in years 2016 to 2020, show thecurrent and deferred tax impact in years 2016 to 2020 of the acquisition of theequipment.In this question the proformas are given to you to help you to setting out your answer.Please use a separate sheet for your workings.2018YearTaxable incomeDepreciation for tax purposesTaxable profit (tax loss)Current tax expense (income)2016201720192020Year20162017201820192020Carrying amountTax baseTaxable temporary differenceOpening deferred tax liabilityDeferred tax expenses (income):Closing deferred tax liability

As per balance sheet approach, the taxable temporary difference is the difference between the tax…

Answered: Question 6 Happy Mart Sdn Bhd acquired…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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QUESTION 33 Peacock Corporation sold equipment during the current year. Its tax gain on the equipment was $4,000 and its book gain on the equipment was $2,000. Peacock will enter $2,000 as a subtraction on Schedule M-1 of Form 1120. Oa. True. Ob. False. QUESTION 34 Which of the following items is an addition on Schedule M-17 Oa. Tax depreciation in excess of book depreciation. Ob. Proceeds of life insurance paid on death of key employee. Oc. Excess of capital losses over capital gains. Od. Tax-exempt interest. O e. None of the above.
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Q. 6
n 20X6, CICO has unrecognized tax losses of $500, 000. In 20X7, the company has additional losses of $100, 000. However, the assessment is that $250, 000 of losses will probably be realized in the future. The current tax rate is 30% and the enacted rate of 20X8 is 28%. What is the entry required in 20X7. Multiple Choice a) Dr. Deferred tax asset $30, 000; Cr. Income tax expense (recovery) $30, 000 b) Dr. Deferred tax asset $70, 000; Cr. Income tax expense (recovery) $70, 000 c) Dr. Deferred tax asset $77, 000; Cr. Income tax expense (recovery) $77, 000 d) Dr. Deferred tax asset $70, 000; Cr. Retained earnings $70, 000
Question oneAbani Limited acquired a machinery on 1/1/2020 for K200,000. The company depreciates the machinery at 25% per annum on cost. The company`s tax rate is 35% and that the year end is 31/12.The company is entitled to the following capital allowances:Year K2020 100,0002021 100 0002022 02023 0The company also had the following profits before tax but after depreciation as follows:Year K2020 125,0002021 140,0002022 175.0002023 192,000You are required to prepare the profit and Loss account extracts for all the yearsa) Ignore Deferred tax b) Include deferred tax c) Statement of Financial position (extracts) for the years 2020 to 2023
5. On January 2, 20x1, Ross Co. purchased a machine for P70,000. This machine has a 5-year useful life, a residual value of P10,000, and is depreciated using the straight-line method for financial statement purposes. For tax-purposes, depreciation expense was P25,000 for 20x1 and P20,000 for 20x2. Ross’ 20x2 income, before income taxes and depreciation expense, was P100,000 and its tax rate was 30%. If Ross had made no estimated tax payments during 20x2, what amount of current income tax liability would Ross report in its December 31, 20x2 balance sheet?
Happy Mart Sdn Bhd acquired an equipment in Year 2016 for RM100,000 anddepreciates it on a straight-line basis over its expected useful life of five years. Theequipment has no residual value. For tax purposes, the equipment is depreciated at25% per annum on a straight-line basis. Tax losses may be carried back againsttaxable profit of the previous five years. In year 2015, the entity's taxable profit wasRM25,000. The tax rate is 20%.
17.On December 31, 20x1, the building of Borong Co. with a historical cost of #320,000,000, accumulated depreciation of #160,000,000, and an estimated useful life of 20 years was determined to have a fair value of $200,000,000. Borong Co. is subject to an income tax rate of 30%. Under the elimination method, the entry to record the revaluation includes a. a debit to accumulated depreciation for $160,000,000. b. a debit to accumulated depreciation for $40,000,000. c. a debit to building for $120,000,000. d. a credit to building for $160,000,000.
1. Excess of tax depreciation over book depreciation $ 208,600 2. Accrual, for book purposes, of estimated loss contingency frompending lawsuit that is expected to be settled in 2020. The losswill be deducted on the tax return when paid. ( 46,900 ) 3. Accrual method used for book purposes and installment methodused for tax purposes for an isolated installment sale of an investment. 224,500 $ 386,200 In analyzing the temporary differences, you find that $ 30,700 of the depreciation temporary difference will reverse in 2020, and $ 115,300 of the temporary difference due to the installment sale will reverse in 2020. The tax rate for all years is 20%.Indicate the manner in which deferred taxes should be presented on Sage Company’s December 31, 2019, balance sheet.
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Depreciation as a Tax Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $123,300. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $46,900 per year for the next five years. The corporation is currently in the 30% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4

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