Depreciation Gire Company began operations at the beginning of 2013, at which time it purchased a depreciable asset for $60,000. For 2013 through 2016, the asset was depreciated on the straight-line basis over a 4-year life (no residual value) for financial reporting. For income tax purposes, the asset was depreciated using MACRS (200%, 3-year life).

For 2013 through 2016, Gire reported pretax financial income and taxable income of the following amounts (the differences are due solely to the depreciation temporary differences):

Over the entire 4-year period, Gire was subject to an income tax of 30%, and no change in the tax rate had been enacted for future years.
Required:
1. Prepare a schedule that shows for each year, 2013 through 2016, the (a) MACRS depreciation, (b) straight-line depreciation,
(c) Annual depreciation temporary difference, and (d) accumulated temporary difference at the end of each year.
2. Prepare Gire's income tax journal entry at the end of (a) 2013, (b) 2014, (c) 2015, and (d) 2016. (Round to the nearest dollar.)
3. Prepare the lower portion of Gire's income statement for (a) 2013, (b) 2014, (c) 2015 and (d) 2016.

Transcribed Image Text:

Year Pretax Financial Income Taxable Income 2013 2014 2015 2)16 $24,998 38,670 27,886 29 446 $20,000 27,000 34,000 40,000