Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara’s buildings has a book value of $1,080,000 and a tax basis of $810,000. There were no other temporary differences and no permanent differences. Taxable income was $6 million and Kara’s tax rate is 25%. What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $37,000 the previous year, prepare the appropriate journal entry to record income taxes this year. 1. Deffered t

In the current year, C Inc. had the following expenses: $4,000 legal fee to register a mortgage on its office building, $7,000 for landscaping the land around the office building and $800 interest paid to CRA for late tax instalments. The legal fee and landscaping expenses were accrued in the current year and paid in the following year. Determine the amount that C's net income for tax purposes will decrease in the current year due to these expenses.

On January 1, year 1 $1,000,000 was collected in advance for rental of a building for a five-year period. The entire $1,000,000 was reported as taxable income for the year. The enacted tax rate for this year is 44%. The enacted tax rate for all future years was 46%. As the result of a change in the tax law, the enacted tax rate for years all years after year 3 is 45%. Make the journal entry to record income tax expense at December 31, year 2, assuming income tax payable is $1,749,000. SHOW COMPUTATIONS

Before considering a tax loss carryforward of $80 million, Aero Corporation reported $200 million of pretax accounting and taxable income in the current year. The income tax rate for all previous years was 40%. On January 1 of the current year a new tax law was enacted, reducing the rate to 35% effective immediately. Aero's income tax payable for the current year would be:     Select one: a. $48 million. b. $28 million. c. $36 million. d. $42 million. e. $80 million.

Ayres Services acquired an asset for $96 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2021. The enacted tax rate is 25% Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 2021 $380 24 (96) Cumulative Temporary Difference Deferred Tax Liability $308 ($ in millions) 2023 2024 2022 $400 24 (0) (0) $415 $450 24 24 (0) $424 $439 $474 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should…

Mallow Incorporated, which has a 21% tax rate, purchased a new business asset. First-year book depreciation was $37,225, and first-year MACRS depreciation was $55,025. As a result of this book/tax difference, Mallow recorded a $3,738 deferred tax asset. True or False True False

For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Pretax accounting income $220,000 Permanent difference (14,200) 205,800 Temporary difference - depreciation (21,000) Taxable income $ 184,800 Tringali's tax rate is 25 %. Assume that no estimated taxes have been paid. What should Tringali report as its income tax expense for its first year of operations?

At the end of the preceding year,  JP Motors had a deferred tax asset of $14,750,000, attributable to its only temporary difference of $59,000,000 for estimated expenses. At the end of the current year, the temporary difference is $54,000,000. At the beginning of the year there was no valuation account for the deferred tax asset. At year-end, JP Motors now estimates that it is more likely than not that one-third of the deferred tax asset will never be realized. Taxable income is $12,900,000 for the current year and the tax rate is 25% for all years.   Required: Prepare journal entries to record JP Motors' income tax expense for the current year.

Iowa Corporation began operations in January 2021 and purchased an equipment for $60,000. Iowa uses straight-line depreciation over 4 years, for financial reporting purposes. For tax purposes, the equipment is fully depreciated in the year of purchase. Pretax accounting income for 2021 was $200,000, which includes interest revenue of $30,000 from municipal bonds. The enacted tax rate is 25% for all years. There are no other differences between accounting and taxable income.   Required:   a. Calculate taxable income in 2021. b. Prepare journal entry in 2021. c. Prepare journal entry assuming taxable income in 2022 is $180,000.

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