PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
Author: Jones
Publisher: MCG
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Chapter 8, Problem 2AP
Several years ago, PTR purchased business equipment for $50,000. PTR’s
- a. Compute PTR’s book and tax basis in the equipment.
- b. Using a 21 percent tax rate, compute PTR’s
deferred tax asset or liability (identify which) resulting from the difference between accumulated book and tax depreciation. - c. Compute PTR’s book and tax gain if it sells the equipment for $14,750.
- d. Explain the effect of the sale on the deferred tax asset or liability computed in b.
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Several years ago, PTR purchased business equipment for $50,000. PTR’saccumulated book depreciation with respect to the equipment is $37,200, and itsaccumulated tax depreciation is $41,000.Required:a.Compute PTR’s book and tax basis in the equipment.b. Using a 21 percent tax rate, compute PTR’s deferred tax asset or liability (identifywhich) resulting from the difference between accumulated book and taxdepreciation.c. Compute PTR’s book and tax gain if it sells the equipment for $14,750.
Ayres Services acquired an asset for $82 million in 2018. The asset is depreciated for financial reporting purposes over four years on a
straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%.
Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows:
Pretax accounting income
Depreciation on the income statement
Depreciation on the tax return.
Taxable income.
($ in millions)
2019
355 $
20.5
(33.5)
Temporary Difference
Deferred Tax Liability
2018
$ 335 $
20.5
(25.5)
$ 330 $ 342 $ 375
2020 2021
370 $ 405
20.5 20.5
(15.5) (7.5)
$ 418
Required:
Determine (a) the 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. Show all amounts as positive amounts. Enter your answers in
millions rounded to 1 decimal place (i.e., 5,500,000 should…
Ayres Services acquired an asset for $116 million in 2018. The asset is depreciated for financial reporting purposes over four years on a
straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%.
Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows:
(S in millions)
2019
$ 420 $ 440 $ 455
29.0
2018
2020
2021
$ 490
Pretax accounting income
Depreciation on the income statement
Depreciation on the tax return
29.0
29.0
29.0
(34.0) (42.0) (24.0)
415 $ 427
(16.0)
$ 503
Taxable income
$ 460
Required:
Determine (a) the 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. Show all amounts as positive amounts. Enter your answers in
millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
Beginning of 2018 End of…
Chapter 8 Solutions
PRINCIPLES OF TAXATION F/BUS...(LL)
Ch. 8 - BBB Company, which manufactures industrial...Ch. 8 - Prob. 2QPDCh. 8 - Prob. 3QPDCh. 8 - Prob. 4QPDCh. 8 - Does the characterization of gain or loss as...Ch. 8 - Distinguish between a firms tax basis in an asset...Ch. 8 - Both Corporation A and Corporation Z have business...Ch. 8 - Mrs. Carly called her accountant with a question....Ch. 8 - Prob. 9QPDCh. 8 - Mr. K realized a loss on the sale of an asset to...
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