Need solutions asap Southern Atlantic Distributors began operations in January 2011 andpurchased a delivery truck for $48,000. Southern Atlantic plans to usestraight-line depreciation over a four-year expected useful life forfinancial reporting purposes. For tax purposes, the deduction is 50% ofcost in 2011, 30% in 2012, and 20% in 2013. Pretax accounting income for2011 was $274,000, which includes interest revenue of $37,000 frommunicipal bonds. The enacted tax rate is 40%.Assuming no differences between accounting income and taxableincome other than those described above; prepare the journal entry torecord income taxes in 2011. (Round your answers to the nearest dollaramount. Enter your answers in thousands. Omit the "$" sign in yourresponse.)

Step 1: Identify Temporary and Permanent DifferencesTemporary Difference: DepreciationAccounting…

Answered: Southern Atlantic Distributors began…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the beginning of 2015, Pitman Co. purchased as asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $200,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 40% for 2015 and all future years. At the end of 2015, what are the book basis and the tax basis of the asset? Book basis Tax basis a. 1,000,000 620,000 b. 980,000 620,000 c. 980,000 720,000 d. 1,000,000 720,000 At the end of 2015. which of the following deferred tax accounts and balances is reported on Pitman's balance sheet? Account Balance a. Deferred tax asset 136,000 b. Deferred tax liability 136,000 c. Deferred tax asset 112,000 d. Deferred tax liability 112,000
Early in January 2021, DeVille Company purchased machinery costing $700,000. For financial reporting purposes, DeVille Company has a December 31st year end and uses straight-line depreciation. DeVille estimates the useful life of this machinery to be four years with no residual value. For tax purposes, the deduction is 40%, 30%, 20%, and 10% over the life of the machinery. Pretax accounting income for 2021 was $800,000, which includes interest revenue of $21,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%. Prepare the journal entry to record the 2021 provision for income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
At the beginning of 2018, Pitman Co. purchased an asset for $1,800,000 with an estimated useful life of 5 years and an estimated salvage value of $150,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used (2X Asset Cost ÷ Useful Life). Pitman Co.’s tax rate is 40% for 2018 and all future years. At the end of 2018, what are the book basis and the tax basis of the asset? Book basis Tax basis` a. $1,320,000 $930,000 b. $1,470,000 $930,000 c. $1,470,000 $1,080,000 d. $1,320,000 $1,080,000
Thor, Inc reported depreciation on the income statement by the straight-line method on an asset with a four-year useful life. MACRS is used for the tax return. Income statement: $5 million each year. Tax Return: 2020 $7 million; 2021 $6 million; 2022 $4 million; 2023 $3 million. The income tax rate is 20% for all years. The current year is 2022. Which of the following statements is true regarding the differences between accounting and tax depreciation? The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is originating, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.6M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.4M. The 2022 beginning balance in the deferred tax liability is $.4M, the 2022 difference is reversing, and the desired ending balance in the 2022 deferred tax liability is $.6M. The 2022…
Bridgeport Corp. purchased depreciable assets costing $36,600 on January 2, 2023. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses straight-line depreciation over five years. The enacted tax rate is 25% for all years. This depreciation difference is the only reversing difference the company has. Calculate the amount of capital cost allowance and depreciation expense from 2023 to 2027, as well as the corresponding balances for the carrying amount and undepreciated capital cost of the depreciable assets at the end of each of the years 2023 to 2027. Assume that these assets are considered “eligible equipment” for purposes of the Accelerated Investment Incentive (under the AII, instead
A COMPANY PURCHASES EQUIPMENT ON JANUARY 1, 2023, FOR $120,000. THE EQUIPMENT HAS AN ESTIMATED USEFUL LIFE OF 5 YEARS AND A SALVAGE VALUE OF $20,000. THE COMPANY USES THE DOUBLE-DECLINING BALANCE (DDB) METHOD FOR DEPRECIATION. THE COMPANY'S TAX RATE IS 30%. CALCULATE THE FOLLOWING: THE DEPRECIATION EXPENSE FOR EACH OF THE FIRST THREE YEARS. THE NET BOOK VALUE OF THE EQUIPMENT AT THE END OF YEAR 3. THE TAX SAVINGS FROM DEPRECIATION FOR EACH OF THE FIRST THREE YEARS.
Irwin, Inc. constructed a machine at a total cost of $79 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2021, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the machine for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Irwin, Inc. constructed a machine at a total cost of $35 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2021, Irwin decided to change to the straight-line method. Ignoring income taxes, what journal entry(s) should Irwin record relating to the machine for 2021?
Purple Corp. reported under GAAP for the year ended 12/31/2024 depreciation expense $45,000 and warranty expense $25,000. During 2024, $5,000 in warranties were serviced, and the remainder is estimated to be serviced over the following 4 years. Under the tax code, depreciation for 2024 would be $60,000. Assuming these are the only differences between GAAP and the tax code, how much would be reported as a deferred tax expense or deferred tax benefit on the income statement for the year ended 12/31/2024 if the future tax rate will be 30%? A A deferred tax expense of $4,500 B A deferred tax benefit of $6,000 C A deferred tax expense of $1,500 D A deferred tax benefit of $1,500
On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2020, the book value of the equipment was $30 million and its tax basis was $20 million. At December 31, 2021, the book value of the equipment was $28 million and its tax basis was $12 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $50 million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen's 2021 net income?
Pharoah Company purchased equipment that cost $3180000 on January 1, 2020. The entire cost was recorded as an expense. The equipment had a 9-year life and a $127200 residual value. Pharoah uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Pharoah is subject to a 30% tax rate. Pharoah’s net income for the year ended December 31, 2020, was understated by $3180000. $2840800. $2226000. $1988560.
Orange Corp.constructed a machine at a total cost of $70 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $4 million. At the beginning of 2021, Orange decided to change to the straight-line method. Ignoring income taxes, what will be Orange's depreciation expense for 2021? Multiple Choice $4.8 million. $9.4 million. $5.4 million. $6.6 million. Next > < Prev 25 of 44

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