Noggle Inc. (Noggle) processes fresh apples that it pur chases from local farmers into apple juice and applesauce. All of Noggle's processing equipment was purchased in 2017 for $900,000. For accounting purposes, Noggle is depreciating the equipment on a straight-line basis over 10 years. For tax purposes, the asset is in a CCA class that allows Noggle to deduct 30 percent of the capital cost of the asset on a declining-balance basis. Because of the half-year rule, Noggle can deduct only one-half of the allowable amount (15 percent) of the cost in 2017. Noggle has an income tax rate of 18 percent and its income before depreciation and taxes is $300,000 in each year from 2017 through 2019. Noggle has no temporary differences between tax and financial reporting except for the difference between depreciation and CCA on the processing equipment, and there are no permanent differences.

a. Calculate Noggle's taxable income in 2017 through 2019.
b. Calculate the amount of income tax that Noggle must pay in 2017 through 2019.
c. Calculate the accounting and tax bases of the processing equipment in 2017 through 2019.
d. Calculate the future tax asset or liability that would be reported on Noggle's balance sheet at the end of 2017 through 2019.
e. Prepare the journal entry that Noggle would make each year to record its income tax expense in 2017 through 2019.
f. Calculate Noggle's net income in 2017 through 2019.
g. What would Noggle's net income be in 2017 through 2019 if it used the taxes pay able method?
h. As a banker, which measure of net income is more useful to you? Explain.

  • CreatedFebruary 26, 2015
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