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: 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: Explain how a change in tax rates affects the measurement of deferred tax amounts.

A: Deferred Tax Asset Items on a company's balance sheet that may be used to reduce taxable income in…

Q: Jhonny Boi died. He is succeeded by only 2 heirs, his wife Marites, and his son Kalook. Marites…

A: Introduction Donor's tax refers to the tax on the gift or the donation as well as which is imposed…

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: What types of income should not be classified as such on a tax return? Why shouldn't they be…

A: Answer Nontaxable income won’t be taxed, whether or not you enter it on your tax return. nontaxable…

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: What is the difference between recognition and realization of a deferred tax asset?

A: A deferred tax asset is a balance-sheet item that decreases a company's taxable income in the…

Q: Explain why someone might owe a tax balance

A: The objective of this question is to understand the reasons why an individual might owe a tax…

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: What is the logic behind allowing tax loss carrybacks/carryforwards?

A: Logic behind allowing tax loss carrybacks and carryforwards: A tax loss carryback permits a company…

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: Some people earn money that is paid to them in cash and then do not include this as income when they…

A: All people require to pay tax on all income they earn either in cash or through any other mode when…

Q: Two reason why expenses may not be deductiable for income tax/ corporatiion tax purposes.

A: Deductible expenses: These include all the expenses that are allowed to be deducted from the gross…

Q: Esquire Comic Book Company had income before tax of $1,350,000 in 2021 before considering the…

A: Income statement is the financial statement which is prepared by the entities to depict the…

Q: deferred tax assets and deferred tax liabilities

A: The deferred tax assets and deferred tax liabilities arise due to the tax effect of timing…

Q: The amount of taxes generated is incorrect...

A: Section 1245 assets comprise personal property used in trade or business and held for over 12…

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: 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: What are FUTA and SUTA taxes? Is there any possible reduction in the FUTA tax rate? If so, what is…

A: Introduction: Employer payroll taxes are paid by the employer from its own funds on the basis of…

Q: the difference between “tax evasion”, “tax avoidance”, and “tax planning”.

A: The differences for terms tax evasion,tax avoidance and tax planning are shown below

Q: What are the advantages of claiming the standard deduction versus itemizing deductions on your…

A: Income tax:   It is the tax every individual or company is liable to pay on the income generated…

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: What is the difference between a progressive tax, a proportional tax, and a regressive tax?

A: Tax is an important concept in the area of finance. The United states has three types of taxes…

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: If you are a tax adviser, would you advise to claim the deduction in full amount or be capitalized…

A: Claim of deduction in form of Capitalized and Depreciation If an entity opt for the deduction of…

Q: For tax purposes, one of the requirements to recognize income is: A) The transaction does not have…

A: For tax purposes, recognizing income typically involves the realization of income, which means the…

Q: 43. True or False. If the debt is canceled due to services rendered by the debtor, the basis of tax…

A: There are cases and instances in which a debtor renders services and in lieu of these services the…

Q: The money you receive back because you have overpaid your taxes is called a tax return. a. true b.…

A: Tax refund is the money which an individual gets back, if he has overpaid his taxes, that is, it is…

Q: Examine the income source rules discussed in the textbook and suggest at least two current tax rules…

A: Manipulation of income to avoid taxes is a typically unlawful and immoral practice. Tax evasion,…

Q: Total After tax cash Cash outflows Tax shields deductions outflows= Cash Year =Interest +…

A: The tax shield = deductions * tax rate

Q: In your opinion, should “tax arbitrage” be made legal? Discuss and provide examples.

A: Tax arbitrage is the practice of profiting from differences that arise from the ways various types…

Q: We tax net income? What economic distortions would occur if we taxed gross receipts?

A: Gross income is the income to the company or an individual after operating activities or providing…

Q: Explain why permanent differences have no deferred tax consequences.

A: A permanent difference is a business transaction that is reported differently for financial and tax…

Q: xercise 4-7 (Algo) Income statement presentation; discontinued operations; restructuring -3, 4-4]…

A: A partial income statement only shows data for a portion of a normal accounting period. This is…

Q: Briefly explain how tax loss carryback and carryforward procedureswork.

A: Loss carryback is a situation in which business is having operating loss in this year and it want to…

Q: Is skepticism necessary for a tax agent? Alternatively, one's expert judgment may suffice

A: An audit is an examination of a company's financial records to determine whether or not they are…

Q: Can you explain the difference between a deferred tax asset, a tax receivable, and a prepaid tax…

A: A deferred tax asset is a tax deduction that can be used in the future to reduce taxable income. A…

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.