Question

Swingley Company uses an accelerated method to depreciate its fixed assets for tax purposes and the straight-line method for financial reporting purposes. In 2014, the accelerated method recognized depreciation of $35,000, while the straight-line method recognized depreciation of $20,000. Taxable income and net income before taxes for that year were $65,000 and $80,000, respectively.
a. If the federal income tax rate is 35 percent, prepare the journal entry recorded by Swingley to accrue its 2014 tax liability.
b. If the federal income tax rate is 30 percent, prepare the journal entry recorded by Swingley to accrue its 2014 tax liability.
c. Briefly explain why the deferred income tax account is considered a liability on the balance sheet and why it is less when the tax rate is 30 percent rather than 35 percent.



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  • CreatedAugust 19, 2014
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