Smith Incorporated acquired a piece of equipment at a total cost of $4,200,000. They use the straight- line method for financial reporting and MACRS depreciation for tax purposes. The asset has a six-year life for book purposes and because they use half year convention the cost is depreciated over six years for tax purposes also. The tax rate is 40%. The following information is available: Year Income before tax and Depreciation Tax Depreciation GAAP Depreciation 1 $920,000 $840,000 $700,000 2 1,600,000 1,344,000 $700,000 3 1,780,000 806,400 $700,000 4 2,100,000 483,840 $700,000 5 1,750,000 483,840 $700,000 6 1,200,500 241,920 $700,000 Total $4,200,000 $4,200,000 Determine the balance of the deferred tax account at the end of each year Prepare the journal entries to record the tax provision for each year.
Smith Incorporated acquired a piece of equipment at a total cost of $4,200,000. They use the straight- line method for financial reporting and MACRS depreciation for tax purposes. The asset has a six-year life for book purposes and because they use half year convention the cost is depreciated over six years for tax purposes also. The tax rate is 40%. The following information is available: Year Income before tax and Depreciation Tax Depreciation GAAP Depreciation 1 $920,000 $840,000 $700,000 2 1,600,000 1,344,000 $700,000 3 1,780,000 806,400 $700,000 4 2,100,000 483,840 $700,000 5 1,750,000 483,840 $700,000 6 1,200,500 241,920 $700,000 Total $4,200,000 $4,200,000 Determine the balance of the deferred tax account at the end of each year Prepare the journal entries to record the tax provision for each year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1) Smith Incorporated acquired a piece of equipment at a total cost of $4,200,000. They use the straight- line method for financial reporting and MACRS
| Year | Income before tax and Depreciation |
Tax Depreciation |
GAAP Depreciation |
| 1 | $920,000 | $840,000 | $700,000 |
| 2 | 1,600,000 | 1,344,000 | $700,000 |
| 3 | 1,780,000 | 806,400 | $700,000 |
| 4 | 2,100,000 | 483,840 | $700,000 |
| 5 | 1,750,000 | 483,840 | $700,000 |
| 6 | 1,200,500 | 241,920 | $700,000 |
| Total | $4,200,000 | $4,200,000 |
- Determine the balance of the
deferred tax account at the end of each year - Prepare the
journal entries to record the tax provision for each year.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 12 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education