Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $540,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $640,000, which includes interest revenue of $12,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $540,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $640,000, which includes interest revenue of $12,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%.

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