
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Elixir inc purchased equipement in 2018 for $50,000 with no residual value. On December 31, 2020
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- Janus Corporation purchased major pieces of manufacturing equipment on January 1, 2020 for a total of $42 million. Janus uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2022, the book value of the equipment was $36 million and its tax basis was $26 million. At December 31, 2023, the book value of the equipment was $34 million and its tax basis was $19 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2023 was $50 million.Required:1. Prepare the appropriate journal entry to record Janus’s 2023 income taxes. Assume an income tax rate of 25%.2. What is Janus’s 2023 after-tax net income?arrow_forwardAt Carla Vista Co., events and transactions during 2020 included the following. The tax rate for all items is 20%.(1) Depreciation for 2018 was found to be understated by $120500.(2) A strike by the employees of a supplier resulted in a loss of $100800.(3) The inventory at December 31, 2018 was overstated by $169800.(4) A disposal of a component of the business resulted in a $1985000 loss.The effect of these events and transactions on 2020 net income net of tax would bearrow_forwardBridgeport 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, insteadarrow_forward
- Greene Co. has pretax book income for the year ended December 31, 2022 in the amount of $315,000 and has a tax rate of 30%. Depreciation for tax purposes exceeded book depreciation by $10,500.What should Greene Co. record as its deferred tax liability for 2022? Group of answer choices $94,500 $0 $91,350 $3150arrow_forwardAyres Services acquired an asset for $96 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2021. The enacted tax rate is 25% Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 2021 $380 24 (96) Cumulative Temporary Difference Deferred Tax Liability $308 ($ in millions) 2023 2024 2022 $400 24 (0) (0) $415 $450 24 24 (0) $424 $439 $474 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should…arrow_forwardThor, 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…arrow_forward
- Computing and Reporting Deferred Income TaxesEarly in January 2019, Oler, Inc., purchased equipment costing $24,000. The equipment had a 2‑year useful life and was depreciated in the amount of $12,000 in 2019 and 2020. Oler deducted the entire $24,000 on its tax return in 2019. This difference was the only one between its tax return and its financial statements. Oler’s income before depreciation expense and income taxes was $354,000 in 2019 and $367,500 in 2020. The tax rate in each year was 25%. Requireda. What amount of deferred tax liability should Oler report in 2019 and 2020? 2019 2020 b. Prepare the journal entries to record income taxes for 2019 and 2020. General Journal Description Debit Credit Income taxes payable To record income taxes for 2019. Income tax expense To record income taxes for 2020. c. Repeat requirement b if in 2019 the U.S. enacts a permanent tax rate change to be effective in…arrow_forwardSINCO Ltd. purchased a piece of equipment in the year 2018 for the sum of $ 200,000. The company is subject to a tax depreciation rate of 25%. According to the following table, what is the depreciation allowance that this company can claim in 2020? (in the following picture : Année is year)arrow_forwardHanshabenarrow_forward
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