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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Turnip Company purchased an asset at a cost of $10,000 with a 10-year life during the current year. Turnip uses differing depreciation methods for financial reporting and income tax purposes. The depreciation expense during the current year for financial reporting is $1,000 and for income tax purposes is $2,000. Turnip is subject to a 30% enacted future tax rate. Prepare a schedule to compute Turnip’s (a) ending future taxable amount, (b) ending deferred tax liability, and (c) change in deferred tax liability (deferred tax expense) for the current year.

(a)

To determine

Prepare a schedule to determine the ending future taxable amount.

Explanation

Calculate the ending future taxable amount:

Ending Future taxable amount}=(Book value of asset under financial reporting)(Book value of asset under income tax reporting)=$9,000<

(b)

To determine

Calculate the ending deferred tax liability.

(c)

To determine

Calculate the change in deferred tax liability (deferred tax expense) for the year.

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