Gire Company began operations at the beginning of 2007, at which time it purchased a depreciable asset for $60,000. For 2007 through 2010, the asset was depreciated on the straight-line basis over a four year life (no residual value) for financial reporting. For income tax purposes the asset was depreciated using MACRS (200%, three year life). For 2007 through 2010,

Chapter 19, Problems #8

Gire Company began operations at the beginning of 2007, at which time it purchased a depreciable asset for $60,000. For 2007 through 2010, the asset was depreciated on the straight-line basis over a four year life (no residual value) for financial reporting. For income tax purposes the asset was depreciated using MACRS (200%, three year life).

For 2007 through 2010, the company reported pretax financial income and taxable income of the following amounts (the differences are due solely to the depreciation temporary differences):

Over the entire four-year period, the company 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, 2007 through 2010, 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 the income tax journal entry at the end of (a) 2007, (b) 2008, (c) 2009, and (d) 2010. (Round to the nearest dollar.)
3. Prepare the lower portion of the income statement for (a) 2007, (b) 2008, (c) 2009 and (d)2010.