Ajax Company began operations on January 1, 2027. For 2027, Ajax reported pretax accounting income of...
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Ajax Company began operations on January 1, 2027. For 2027, Ajax reported pretax accounting income of $165,000 (Ajax expects this income to continue through 2029). Ajax uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. Below is a table summarizing these temporary differences: Depreciation Expense US GAAP Tax Code Reporting Deduction Tax Rate 2027 (actual) $ 35,000 $ 56,000 20% 2028 (estimated) 35,000 32,000 18% 2029 (estimated) 35,000 17,000 15% Total $105,000 $105,000 The tax rate in 2027 is 20% but is scheduled to decrease each year as shown above. Required: Provide journal entries to record income tax expense and deferred tax liability based on the scheduled tax rates. Ajax Company began operations on January 1, 2027. For 2027, Ajax reported pretax accounting income of $165,000 (Ajax expects this income to continue through 2029). Ajax uses straight-line depreciation for financial reporting and accelerated depreciation for tax purposes. Below is a table summarizing these temporary differences: Depreciation Expense US GAAP Tax Code Reporting Deduction Tax Rate 2027 (actual) $ 35,000 $ 56,000 20% 2028 (estimated) 35,000 32,000 18% 2029 (estimated) 35,000 17,000 15% Total $105,000 $105,000 The tax rate in 2027 is 20% but is scheduled to decrease each year as shown above. Required: Provide journal entries to record income tax expense and deferred tax liability based on the scheduled tax rates.
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Working notes Computation of Taxable income Pretax financial income Temporary differences Deprec... View the full answer
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
Posted Date:
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