Chapter 9, Problem 9.29BE

LO 4

(Learning Objective 4: Account for deferred taxes payable) Coldwell Transportation owns a fleet of 60 semi-trucks. The original cost of the fleet was $9,000,000. Coldwell uses straight-line deprecation for the fleet for accounting purposes, and MACRD depreciation for tax purpose. The company had a deferred tax liability balance of $248,000 at the end of fiscal year 2017 related to the fleet.

At the end of fiscal year 2018, the GAAP book value of the fleet was $7,680,000, while the tax book value was $6,980,000. Coldwell’s taxable income for fiscal year 2018 was $950,000. Its tax rate was 40%

Requirements

  1.    Calculate the deferred tax liability related to the fleet as of the end of fiscal year 2018.

  2.    Record the tax accrual for 2018 as of the end of fiscal year 2018.