Fox Corporation purchased a machine on January 1 of Year 1, that cost $40,000. The machine...
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Fox Corporation purchased a machine on January 1 of Year 1, that cost $40,000. The machine had an estimated service life of five years and no residual value. Fox uses straight-line depreciation for accounting purposes and accelerated depreciation for the income tax return as follows: Year 1, 30%; Year 2, 25%; Year 3, 20%; Year 4, 15%; and Year 5, 10%. Taxable income on the tax return for Year 1 was $150,000. The Year 1 income statement also showed a $15,000 expense for premiums paid for life insurance policies on company executive officers. The income tax rate is 25% in Year 1 and 35% in all subsequent years. a. Prepare a schedule to determine deferred tax balances on December 31, for Year 1 through Year 5. Equipment, Net GAAP Basis Tax Basis Difference between GAAP and tax bases Tax rate $ $ $ Year 1 35% $ $ $ Year 2 35% $ $ $ Year 3 35% $ $ 69 $ $ Year 4 35% b. Record the income tax journal entry on December 31 of Year 1, 2, 3, and 4. $ $ $ $ LA Year 5 35% Fox Corporation purchased a machine on January 1 of Year 1, that cost $40,000. The machine had an estimated service life of five years and no residual value. Fox uses straight-line depreciation for accounting purposes and accelerated depreciation for the income tax return as follows: Year 1, 30%; Year 2, 25%; Year 3, 20%; Year 4, 15%; and Year 5, 10%. Taxable income on the tax return for Year 1 was $150,000. The Year 1 income statement also showed a $15,000 expense for premiums paid for life insurance policies on company executive officers. The income tax rate is 25% in Year 1 and 35% in all subsequent years. a. Prepare a schedule to determine deferred tax balances on December 31, for Year 1 through Year 5. Equipment, Net GAAP Basis Tax Basis Difference between GAAP and tax bases Tax rate $ $ $ Year 1 35% $ $ $ Year 2 35% $ $ $ Year 3 35% $ $ 69 $ $ Year 4 35% b. Record the income tax journal entry on December 31 of Year 1, 2, 3, and 4. $ $ $ $ LA Year 5 35%
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Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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