Entity XYZ acquires a machine for CU100,000. The machine has an estimated useful life of 5 years and zero salvage value. For tax purposes, however, the useful life is 4 years. Net income before taxes equals CU110,000 each year. Every year XYZ has tax-free revenues CU10,000. The statutory tax rate is 20%. Required: 1. Calculate the current tax, the tax expense, and the deferred tax asset or liability for each year. 2. Calculate the effective tax rate and the current tax rate and comment on them.
Entity XYZ acquires a machine for CU100,000. The machine has an estimated useful life of 5 years and zero salvage value. For tax purposes, however, the useful life is 4 years. Net income before taxes equals CU110,000 each year. Every year XYZ has tax-free revenues CU10,000. The statutory tax rate is 20%. Required: 1. Calculate the current tax, the tax expense, and the deferred tax asset or liability for each year. 2. Calculate the effective tax rate and the current tax rate and comment on them.
Chapter2: The Domestic And International Financial Marketplace
Section2.A: Taxes
Problem 7P
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Entity XYZ acquires a machine for CU100,000. The machine has an estimated useful life of 5 years and zero salvage value. For tax purposes, however, the useful life is 4 years. Net income before taxes equals CU110,000 each year. Every year XYZ has tax-free revenues CU10,000. The statutory tax rate is 20%.
Required:
1. Calculate the current tax, the tax expense, and the
2. Calculate the effective tax rate and the current tax rate and comment on them.
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