Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated forfinancial reporting purposes over four years on a straight-line basis with no residualvalue. For tax purposes the asset is depreciated using an accelerated method. The enactedtax rate is 30%.Annual amounts for pretax accounting income, depreciation, and taxable income are asfollows:2021202220232024Pretax accounting income$500$550$600$650Depreciation on the income statement40404040Depreciation on the tax return(50)(66)(30)_(14).Taxable income450484570636On December 31, 2023, what amount of deferred tax liability would Auburn report?Multiple ChoiceS3.2 million$10.0 million$26.0 million$7.8 million< Prev19 of 40Next >

Deferred tax liability is the amount of tax due and not yet paid to the federal tax authorities.

Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis with no residual value. For tax purposes the asset is depreciated using an accelerated method. The enacted tax rate is 30%.

Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis with no residual value. For tax purposes the asset is depreciated using an accelerated method. The enacted tax rate is 30%.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 5MC: At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial...

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Turnip Company purchased an asset at a cost of 10,000 with a 10-year life during the current year. Turnip uses differing depreciation methods for financial reporting and income tax purposes. The depreciation expense during the current year for financial reporting is 1,000 and for income tax purposes is 2,000. Turnip is subject to a 30% enacted future tax rate. Prepare a schedule to compute Turnips (a) ending future taxable amount, (b) ending deferred tax liability, and (c) change in deferred tax liability (deferred tax expense) for the current year.
Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350
Deferred Tax Liability: Depreciation At the beginning of 2019, its first year of operations, Cooke Company purchased an asset for 100,000. This asset has an 8-year economic life with no residual value, and it is being depreciated by the straight-line method for financial reporting purposes. For tax purposes, however, the asset is being depreciated using the MACRS (200%, 5-year life) method. During 2019, Cooke reported pretax financial income of 51,500 and taxable income of 44,000. The depreciation temporary difference caused the difference between the two income amounts. The tax rate in 2019 was 30%, and no change in the tax rate had been enacted for future years. Required: 1. Prepare a schedule that shows for each year, 2019 through 2026, (a) MACRS depreciation, (b) straight line depreciation, (c) the annual depreciation temporary difference, and (d) the accumulated temporary difference at the end of each year. 2. Prepare a schedule that computes for each year, 2019 through 2026, (a) the ending deferred tax liability and (h) the change in the deferred tax liability. 3. Prepare Cookes income tax journal entry at the end of 2019. 4. Next Level Explain what happens to the balance of the deferred tax liability at the end of 2019 through 2026.
Incomc Taxes Then Company has been in operation for several years. It has both a deductible and a taxable temporary difference. At the beginning of 2019, its deferred tax asset was 690, and its deferred tax liability was 750. The company expects its lutine deductible amount to be deductible in 2020 and its Inline taxable amount to 1 taxable in 2021. In 2018, Congress enacted income tax rates for future years as follows: 2019, 30%; 2020, 34%; and 2021, 35%. At the end of 2019, Then reported income taxes payable of 25,800, an increase in its deferred tax liability of 300, and an ending balance in its deferred tax asset of 860. Thun has prepared the following schedule of items related to its income taxes for 2019. Required: Fill in the blanks in the preceding schedule. Show your calculations.
Deferred Tax Liability: Depreciation Gire Company began operations at the beginning of 2019 at which time it purchased a depreciable asset for 60, 000. For 2019 through 2022, the asset was depreciated on the straight-line basis over a 4-year life (no residual value) for financial reporting. For income tax purposes, the asset was depreciated using MACRS (200%, 3-year life). For 2019 through 2022, Gire reported pretax financial income and taxable income of the following amounts (the differences are due solely to the depreciation temporary differences): Over the entire 4-year period, Gire was subject to an income tax of 30%, and no change in the tax rate had been enacted for future years. Required: 1. Prepare a schedule that shows for each year, 2019 through 2022, the (a) MACRS depreciation, (b) straight-line depreciation, (c) annual depreciation temporary difference, and (d) accumulated temporary difference at the end of each year. 2. Prepare Gires income tax journal entry at the end of (a) 2019, (b) 2020, (c) 2021, and (d) 2022. (Round to the nearest dollar.) 3. Prepare the lower portion of Gires income statement for (a) 2019, (b) 2020, (c) 2021, and (d) 2022.
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