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 beginning balance in the deferred tax liability is $.4M, the 2022 difference is originating, and the desired ending balance in the 2022 deferred tax liability is $.6M.

Differed Tax Liability: It is created when there are temporary differences book tax and actual…

Answered: Thor, Inc reported depreciation on the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

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 beginning balance in the deferred tax liability is $.4M, the 2022 difference is originating, and the desired ending balance in the 2022 deferred tax liability is $.6M.

Expert Solution

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions