Purple Ltd purchased a depreciable asset for $900,000 on 1 July 2014. For accounting purposes, it is estimated to have a useful life of 8 years with no residual value. For taxation purposes, the useful life is 6 years with no residual value. The asset is depreciated on a straight-line basis for both accounting and tax purposes. Tax rate is 30%. What is the adjustment required in the deferred tax liability account for the year ended 30 June 2020 and 30 June 2021 respectively in accordance with the requirements of AASB112 Income Taxes? $11,250; $11,250 $11,250; $33,750 $11,250; ($33,750) $11,250; ($11,250)
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- At the beginning of 2018, FECC Corporation had discovered that the depreciation expense inthe years prior to 2018 was incorrectly calculated and recorded. For the years before 2018,total depreciation expense of $165,000 was recorded, whereas correct total depreciationexpense was $75,000. The tax rate is 30%. FECC follows IFRS and the deferred taxes method ofaccounting for income taxes.Required:1) Prepare FECC’s 2017 journal entry with respect to the depreciation expense that wasrecorded in the years prior to 2018.Assume that for a particular company the only temporary difference for tax effect accounting purposes relates to the depreciation of a newly acquired machine. The machine is acquired on 1 July 2015 at a cost of $212,000. Its useful life is considered to be 7 years, after which time it is expected to have no residual value. For tax purposes it can be fully written off over 5 years. The tax rate is assumed to be 30 per cent. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2018. Type in the answer below the correct amount. Answer:Ayres Services acquired an asset for $116 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: (S in millions) 2019 $ 420 $ 440 $ 455 29.0 2018 2020 2021 $ 490 Pretax accounting income Depreciation on the income statement Depreciation on the tax return 29.0 29.0 29.0 (34.0) (42.0) (24.0) 415 $ 427 (16.0) $ 503 Taxable income $ 460 Required: Determine (a) the 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. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Beginning of 2018 End of…
- Ayres Services acquired an asset for $82 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return. Taxable income. ($ in millions) 2019 355 $ 20.5 (33.5) Temporary Difference Deferred Tax Liability 2018 $ 335 $ 20.5 (25.5) $ 330 $ 342 $ 375 2020 2021 370 $ 405 20.5 20.5 (15.5) (7.5) $ 418 Required: Determine (a) the 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. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should…LOVE INC. has a policy of using non-current assets until they can no longer operate and are worthless. On January 1, 2015, it acquired an item of plant and machinery for P100,000. It is being depreciated over 10 years on a straight-line basis. For tax purposes, there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals.What deferred tax balance should LOVE recognized at December 31, 2015, according to PAS 12 Income taxes? a. Deferred tax asset of P2,500b. Deferred tax asset of P1,500c. Deferred tax liability of P2,500 d. Deferred tax liability of P1,500.Happy Mart Sdn Bhd acquired an equipment in Year 2016 for RM100,000 and depreciates it on a straight-line basis over its expected useful life of five years. The equipment has no residual value. For tax purposes, the equipment is depreciated at 25% per annum on a straight-line basis. Tax losses may be carried back against taxable profit of the previous five years. In year 2015, the entity's taxable profit was RM25,000. The tax rate is 20%. Required:- Assuming nil profits/losses after depreciation in years 2016 to 2020, show the current and deferred tax impact in years 2016 to 2020 of the acquisition of the equipment. In this question the proformas are given to you to help you to setting out your answer. Please use a separate sheet for your workings. Year Taxable income Depreciation for tax purposes Taxable profit (tax loss) Current tax expense (income) 2016 2017 2018 2019 2020 Year |Carrying amount Tax base Taxable temporary difference 2016 2017 2018 2019 2020 Opening deferred tax…
- A Ltd purchased four motor vehicles for $50000 each on 1/1/2015. The company depreciates motor vehicles on a straight-line basis. Their expected useful life is six years.Each motor vehicle has a residual value of $5000. For tax purposes, the motor vehicles depreciate at 20% per annum on a straight-line basis. Accounting profit before tax (PBT) for the years 2015 to 2020 is $60000 per annum. The tax rate is 12.5%. Required Calculations of current and deferred tax Related figures to be included in the financial statements for the years 2015 to 2020WhyRU Company usually depreciates its equipment using straight line method for accounting purposes, but for tax purposes its sum-of-the-years method. WhyRU Company acquired the equipment through purchase amounting to P2,400,000 on January 1,2018. Assume a tax rate of 30%. Useful life is 4 years. WhyRU Company made the following income in its income tax return available through reports for 2018 – P800,000; 2019 – P890,0000; 2020 – P1,200,000; 2021 – P1,500,000 There is no other differences between WhyRU's accounting income and taxable income for years 2018, 2019, 2020 and 2021 other than for the difference in depreciation for the equipment described.Happy Mart Sdn Bhd acquired an equipment in Year 2016 for RM100,000 anddepreciates it on a straight-line basis over its expected useful life of five years. Theequipment has no residual value. For tax purposes, the equipment is depreciated at25% per annum on a straight-line basis. Tax losses may be carried back againsttaxable profit of the previous five years. In year 2015, the entity's taxable profit wasRM25,000. The tax rate is 20%.
- The term tax shield refers to the amount of income tax saved by deducting depreciation for income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five-year life and zero residual value is $100,000. The company will use the straight-line method of depreciation. Supreme's income for tax purposes before recording depreciation on the asset will be $50,000 per year for the next five years. The corporation is currently in the 35% tax bracket. Required: Calculate the amount of income tax that Supreme must pay each year if the asset is and is not purchased. 1. Amount of taxes paid if asset is not purchased is: $fill in the blank 1 2a. Amount of depreciation if asset is purchased is: $fill in the blank 2 b. Amount of taxes paid if asset is purchased is: $fill in the blank 3 3. What is the amount of the depreciation tax shield? $fill in the blank 4Assume that for a particular company, the only temporary difference for tax-effect accounting purposes relates to the depreciation of a newly acquired machine. The Machine was acquired on 1 July 2018 at the cost of $800,000. Its useful life is considered to be five years, after which time it is expected to have no residual value. For tax purposes, it can be fully written off over two years. The tax rate is assumed to be 30 per cent. Required 1 Determine whether the depreciation of the Machine will lead to a deferred tax asset or a deferred tax liability? 2 What would be the deferred tax asset balance or deferred tax liability as of 30 June 2021? 3 Briefly explain how a company calculates its current liability 'income tax payable'?At the beginning of 2015, Pitman Co. purchased as asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $200,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 40% for 2015 and all future years. At the end of 2015, what are the book basis and the tax basis of the asset? Book basis Tax basis a. 1,000,000 620,000 b. 980,000 620,000 c. 980,000 720,000 d. 1,000,000 720,000 At the end of 2015. which of the following deferred tax accounts and balances is reported on Pitman's balance sheet? Account Balance a. Deferred tax asset 136,000 b. Deferred tax liability 136,000 c. Deferred tax asset 112,000 d. Deferred tax liability 112,000