Several years ago, Western Electric Corp. purchased equipment for $20,500,000. Western uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $18,450,000 and its tax basis was $15,375,000. At December 31, 2021, the carrying value of the equipment was $16,400,000 and the tax basis was $1,275,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,500,000. A tax rate of 25% applies to all years. Required: Prepare the journal entry to record Western's income tax expense for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Several years ago, Western Electric Corp. purchased equipment for $20,500,000. Western uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $18,450,000 and its tax basis was $15,375,000. At December 31, 2021, the carrying value of the equipment was $16,400,000 and the tax basis was $1,275,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year was $25,500,000. A tax rate of 25% applies to all years. Required: Prepare the journal entry to record Western's income tax expense for the current year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Several years ago, Western Electric Corp. purchased equipment for $20,500,000. Western uses straight-line depreciation for financial
reporting and accelerated depreciation for tax purposes. At December 31, 2020, the carrying value of the equipment was $18,450,000
and its tax basis was $15,375,000. At December 31, 2021, the carrying value of the equipment was $16,400,000 and the tax basis was
$11,275,000. There were no other temporary differences and no permanent differences. Pretax accounting income for the current year
was $25,500,000. A tax rate of 25% applies to all years.
Required:
Prepare the journal entry to record Western's income tax expense for the current year. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field.)
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