Wheeler Co. purchased machinery on 1/1/2022 for $450,000. Assuming no salvage value, Wheeler depreciated the asset straight line over a 5-year life and assumed a residual value of $40,000 for Book purposes. For taxes, the asset is also depreciated over a 5-year life, but with the assumption of no residual value for Tax purposes. Required: (a) What would be the balance in the Deferred Tax Liability account for the 2021 and 2022, assuming a 21% tax rate? (b) On 1/1/2023, Nancy Wheeler, the CEO of Wheeler Co, realized the asset had no additional productive value and sold the asset for $240,000. General Ledger Year Depreciation as per book Depreciation as per Tax Depreciation difference Tax rate Deferred tax liability Closing balance at the end of the each year 2022 82000 1680 1680 90000 90000 2023 82000 1680 3360 2024 90000 1680 5040 2025 90000 1680 6720 2026 90000 1680 8400 0 8400 adjusted basis sales value gain/loss tax expense 82000 82000 82000 360000 240000 120000 25200 8000 8000 8000 8000 8000 1 Cash Account Machinery Account 2 Machinery Account Profit and Loss account Deferred Taxes, 2022 Deferred Taxes, 2023 Tax Expense, 1/1/2024 3 Income tax expenses Income tax provision 21% 21% 21% 21% 21% Debit 240000 240000 50400 1680 1680 25200 Credit 240000 240000 50400 tax on gain or loss, and reversal of deferred tax

Q: TRUE OR FALSE? 1st statement: Interest income must be included in the computation of gross income if…

A: Gross Income: The entire earnings a person obtains before taxes and other deductions are referred to…

Q: 2. Discuss the tax pol8icy implications of the saying “an old tax is a good tax"

A: Tax:- Taxes can be defined as the compulsory contribution to the state’s or country’s revenues,…

Q: What do you think is the reason why governments grants "exclusion from the gross income

A: Possible reasons why government grants exclusions from gross income can be as follows.  1) To…

Q: How is the theory and the basis for taxation is different?

A: Tax: Tax refers to a compulsory payment or a contribution to the state revenue, levied by the…

Q: Deferred tax assets and deferred tax liabilities represent the tax effect of the temporary…

A: Temporary differences are those differences which are there in between carrying value of asset or…

Q: The object of distraint may either be personal and/or real properties of a delinquent taxpayer

A: Delinquent taxpayers are those taxpayers who did not pay the amount of taxes due till the deadlines.…

Q: Why is fringe benefit tax important?

A: Fringe benefits are those compensation and benefits provided to the employees which are other than…

Q: an item is excluded from income taxation, it would follow that the same is likewise exempt from…

A: Ans. In regard to tax laws various tax treatments are made while calculating tax liability.

Q: Which of the following refunds is not subject to income tax a, Local tax expense b.Special…

A: Answer: Th refund which is not subject to income tax are those amount for which earlier deduction…

Q: True or false is regulatory tax is intended to achieve some social or economic end?

A: Regulatory tax: Regulatory taxes are the charge or levy of taxes by the government on the general…

Q: Non-assessable income does not increase tax liability, but tax-free income increases tax liability-…

A: Non-Assessable Income-: Non-assessable non-exempt revenue is common or statutory revenue that is…

Q: Ordinary and necessary trade or business expenses used to generate tax-exempt income would be…

A: Deductible business expenses are expenses that a business incurs in order to earn income or conduct…

Q: Among the highlights of train law, which do you think is disadvantageous for the taxpayer? Explain

A: TRAIN is an acronym popularly used for The Tax Reform for Acceleration and Inclusion Act. It is an…

Q: Adopting wrongful means to show less profit to avoid tax is part of : a. Tax evasion b. Tax planning…

A: Tax is being the compulsory payment that is to be made to the government by the corporations,…

Q: In the Eisner v. Macomber tax case, what were the facts of case, court decision, and reasons stated…

A: Eisner v. Macomber case was a tax case that was held before the United States Supreme Court.

Q: Why would a taxpayer file a tax return if not required to do so?

A: A person is required to file the income tax return as per their respective country’s taxation law.…

Q: Contrast tax evasion and tax avoidance.  Which one is illegal, and which one is legal

A:

Q: Property and income taxes are more popular than sales taxes and user charges? True or False

A: Taxes are the fees charged by the government to collect revenue and run the country. The money…

Q: why transport and traveling are not allowable for tax purposes

A: Transport and traveling expenses are typically not allowable for tax purposes because they are…

Q: Regressive tax takes a higher proportion of a poorer person’s income than of a richer person’s…

A: Tax is the obligation on the people which is charged as a mandatory fee by the government or…

Q: what is the disadvantage of not providing deferred tax?

A: Deferred tax is an accounting method used to recognize the effect of taxes on the financial…

Q: what is mean by Tax evasion and what reasons the people do this?

A: Tax obligation represents the liability of the taxpayer towards the government for the payment of a…

Q: Regarding taxpayers having a tough time of volume of tax regulations. What does the concept…

A: Substance over form: It is an accounting concept, which means that the business must record those…

Q: In the case of income tax there are high taxpayer costs but low government costs ? True or False

A: Income tax is known as the form of tax that is imposed on the income or profits of individuals or…

Q: the deciosion of court in Eisner v. Macomber tax case and why?

A: Eisner V. Macomber tax case : Case Insight No. : , 252 U.S. 189 (1920), presented before the U.S…

Q: Describe some reasons why it is a good idea to file a tax return if you have earned income, even if…

A: If there is no tax liability, even then the Income-tax return (ITR) is mandatory to file if the…

Q: When DTA reverses, income tax payable is reduced, while when DTL reverses, income tax payable is…

A: Temporary differences are differences between book income and taxable income of the business. These…

Q: Is it right to avoid taxes as much as you can?

A: Taxation- The laws and regulations that govern the financial services industry are referred to as…

Q: why bad debt is not tax allowable

A: Bad debt refers to money owed by a debtor that is unlikely to be collected. It often occurs when a…

Q: It is the tax legislator who determines the value of the offer true Error 0

A: Value is determined as per law rules and regulations

Q: In a regressive tax system, as taxable income increases, the effective tax rate decreases ◻ True…

A: The question is asking whether in a regressive tax system, the effective tax rate decreases as the…

Q: What is meant by two terms, ‘tax evasion’ and ‘tax avoidance’? Give your answer with examples of…

A: The financial position of the company can be arrived from the income statement prepared by the…

Q: Will you be imprisoned for non-payment of tax? Is it absolute?

A: Income Tax- Income tax is a tax levied on a person's or a company's earnings for the previous year.…

Q: earnings below a certain threshold are taxed. What is your opinion on the fairness of this tax?

A: social security tax is such type of tax in which a percentage of the gross wages that most of the…

Q: Distinguish between “juridical double taxation” and “economic double taxation”.

A: Juridical double taxation refers to a situation where the same taxpayer is subject to taxation on…

Q: In almost all cases, making contributions to an RRSP will provide the deferral of income tax. In…

A: Introduction: RRSP (Registered Retirement Savings Plan): A (RRSP) is a retirement funds plan where…

Q: 4. Why is real property tax a better tax than personal property?

A: Real property taxes are taxes levied on real property like commercial, industrial property ,…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.