salvage value. The depreciation schedule for GAAP and tax purposes follows. Year GAAP Depreciation Tax Depreciation Year 1 $100,000 Year 2 152,000 Year 3 148,000 Year 4 Year 5 $80,000 80,000 80,000 80,000 80,000 0 0 The tax rate for Year 1 through Year 3 is 25%, but a new law is passed in Year 1 that will raise the tax rate in Year 4 and thereafter to 30%. Pretax GAAP income equals $480,000 in Year 1 and Year 2. There are no other differences between pretax GAAP income and tax income. Required a. Record the income tax journal entry on December 31 of Year 1 (assuming the original tax depreciation schedule provided).
salvage value. The depreciation schedule for GAAP and tax purposes follows. Year GAAP Depreciation Tax Depreciation Year 1 $100,000 Year 2 152,000 Year 3 148,000 Year 4 Year 5 $80,000 80,000 80,000 80,000 80,000 0 0 The tax rate for Year 1 through Year 3 is 25%, but a new law is passed in Year 1 that will raise the tax rate in Year 4 and thereafter to 30%. Pretax GAAP income equals $480,000 in Year 1 and Year 2. There are no other differences between pretax GAAP income and tax income. Required a. Record the income tax journal entry on December 31 of Year 1 (assuming the original tax depreciation schedule provided).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please Explain Proper And Show All Step Do Not Give Solution In Image Format And Thanks In Advance
Transcribed Image Text:Reporting Changes in Enacted Tax Rates
On January 1 of Year 1, Keefe Corporation purchased equipment at a cost of $400,000. The equipment has a five-year life and no
salvage value. The depreciation schedule for GAAP and tax purposes follows.
Year GAAP Depreciation Tax Depreciation
Year 1
$100,000
Year 2
152,000
Year 3
148,000
Year 4
Year 5
$80,000
80,000
80,000
80,000
80,000
The tax rate for Year 1 through Year 3 is 25%, but a new law is passed in Year 1 that will raise the tax rate in Year 4 and thereafter to
30%. Pretax GAAP income equals $480,000 in Year 1 and Year 2. There are no other differences between pretax GAAP income and tax
income.
Required
Date
Dec. 31, Year 1
0
0
a. Record the income tax journal entry on December 31 of Year 1 (assuming the original tax depreciation schedule provided).
Date
Dec. 31, Year 2
Account Name
To record income tax expense
Account Name
Dr.
To record income tax expense
b. Record the income tax journal entry on December 31 of Year 2 (assuming the original tax depreciation schedule provided).
ooo
Dr.
Cr.
OOO
0
0
0
Cr.
0
0
0
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