Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 8P
Calculate the annual difference between the cash flow and the deductibility for tax purposes of the purchase of a $20,000 truck. The truck is
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Pet Supply purchased fixed assets two years ago at a cost of $43,800. It no longer needs the assets, so it is going to sell them today for $32,500. The assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. What is the net cash flow from the sale if the tax rate is 35%?
Mergeron Industries purchases a new delivery van. The van costs $32,000 and is expected to last 5 years. The company uses straight-line depreciation for accounting purposes. The residual value is expected to be $2,000. The summary rate is 30%.
Calculate the deferred tax liability for year one ignoring the half year rule.(place answer in the space below without a $ sign)
Computation of taxable income.
The records for Bosch Co. show this data for 2018:
· Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $320,000.
Life insurance on officers was $3,800.
Machinery was acquired in January for $300,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Bosch may deduct 14% for 2018.
Interest received on tax exempt Iowa State bonds was $9,000.
The estimated warranty liability related to 2018 sales was $21,600. Repair costs under warranties during 2018 were $13,600. The remainder will be incurred in 2019.
Pretax financial income is $700,000. The tax rate is 30%.
Instructions
(a) Prepare a schedule starting with pretax financial income and compute taxable income.
(b) Prepare the journal entry to record income taxes for 2018.
Chapter 13 Solutions
Construction Accounting And Financial Management (4th Edition)
Ch. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - What is the difference between effective tax rate...Ch. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Using a tax rate of 21%, determine the amount of...Ch. 13 - Using the tax rates in Table 13-2, determine the...Ch. 13 - Calculate the annual difference between the cash...Ch. 13 - Calculate the annual difference between the cash...Ch. 13 - Your company spent 5,000 last year on...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Reversing Rapids Co. purchases an asset for $147,552. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for $11,409. Calculate book value of an asset. Round the answer to two decimals. Answer: (25,496.99) answer is given pls how to getarrow_forwardIn year 1, Firm A paid $51,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,200 and $7,300 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Required: Compute Firm A’s net cash flow attributable to the asset purchase in each year. Compute Firm A’s adjusted basis in the asset at the end of each year.arrow_forwardGenetic Insights Co. purchases an asset for $10,473. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. Genetic Insights has a tax rate of 30%. The asset is sold at the end of six years for $4,805. Calculate book value of an asset. Round the answer to two decimals.arrow_forward
- ABC Co purchases a Bus at a price of OMR 25,000 and incurred other expenditures such as non-refundable taxes OMR 2,500, painting of Truck OMR 1,500, motor vehicle license OMR 100, and a three-year accident insurance policy OMR 2,000. What is the cost of the bus to be capitalised? O a. OMR 29,000. O b. OMR 25,000. OC OMR 22,500. O d. OMR 31,100.arrow_forwardThe company has a list of equipment they sold during the tax year. Please review the list and answer the questions below:Equipment - MACRS Year - Property Cost - Accumulated Depreciation - Sales PriceLuxury Car 5 Year Property $45,000 $20,000 $15,000Computer 5 Year Property $3,500 $1,200 $100Furniture 7 Year Property $92,000 $48,000 $40,0006. What will be the tax treatment as follows for the sale of the Luxury Cara. Calculate the Realized Gain or Lossb. What will be the character and amount of the Recognized gain?arrow_forwardABC Company purchased a machine costing P 10,000,000 on January 1, 2021 with an estimated useful life of 10 years and residual value of P 500,000. It is the company's policy to depreciate this type of asset using double declining balance but for tax purposes, straight-line method is being used. The enacted tax rate for the current and next periods would be 30% and for the last 3 years in the life of the machine the enacted tax rate would be 32%.ABC Company computed the following income in its income tax return for the following years:2021 1,500,0002022 2,000,0002023 2,500,0002024 3,000,0002025 2,750,0002026 3,500,0002027 4,000,0002028 3,750,0002029 1,750,0002030 4,500,000Other than the difference in the depreciation method being used for the machine, there is no other difference between ABC's accounting and taxable income during the life of the asset.How much is the income tax payable as of December 31,2025?arrow_forward
- 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…arrow_forwardDuring 2021, Dud Co. purchases only one asset: equipment (7-year property) for $1,650,000. Dud takes the maximum Sec. 179 deduction and elects out of 100% bonus. In the table below, Compute the maximum tax depreciation for the machinery for 2021-2028, respectively. Answer in whole numbers only, with no decimals, no commas, and no dollar signs. Year 2021 2021 2022 2023 2024 2025 2026 2027 2028 total all years Depreciation Sec. 179 deduction amount (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)arrow_forwardAyres Services acquired an asset for $200 million in 2021. 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 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: 2021 $405 $425 ($ in millions) 2022 2023 2024 $440 Pretax accounting income Depreciation on the income statement Depreciation on the tax return $475 50 50 50 50 (64) (84) (30) (22) Taxable income $391 $391 $460 $503 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 "O" wherever applicable. Enter your answers in millions rounded to 2 decimal place (i.e., 5,500,000 should be entered as 5.50).) Beginning of End of 2021 End of End of End…arrow_forward
- Northwestern Export Services purchased some computers for $80,000 in Year 1. The equipment is depreciated for financial reporting purposes over 5 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 20%. Amounts for pretax GAAP accounting income, depreciation, and taxable income in Year 1, Year 2, Year 3, Year 4, and Year 5 are as follows: $ in thousands Year 1 Year 2 Year 3 Year 4 Year 5 Pretax accounting income $240 $195 $210 $285 $320 Depreciation on income statement 16 16 16 16 16 Depreciation on tax return (27) (35) (12) (6) 0 Taxable income $229 $176 $214 $295 $336 a) What type of book-tax difference is this? b) Prepare the appropriate journal entry related to the tax deferral ONLY at December 31, Year 1. (Note: The purchase of computers has already been recorded in Year 1.)Note: Round answers ($ in thousands) to the nearest whole number, if applicable. ($ in thousands)…arrow_forwardAuburn 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%. Annual amounts for pretax accounting income, depreciation, and taxable income are as follows: 2021 2022 2023 2024 Pretax accounting income $500 $550 $600 $650 Depreciation on the income statement 40 40 40 40 Depreciation on the tax return (50) (66) (30) _(14). Taxable income 450 484 570 636 On December 31, 2023, what amount of deferred tax liability would Auburn report? Multiple Choice S3.2 million $10.0 million $26.0 million $7.8 millionarrow_forwardTotem group is planning to purchase a new printing machine to replace a current machine. The cost of the new machine Konica Minolta 512i , including delivery and installation, is IDR 140,000,000. If it is purchased, Totem will incur costs of IDR 10,000,000 to remove the current printing machine and revamp its facilities and it is tax deductible at time 0. Depreciation for tax purposes will be as follows: year 1, IDR 28,000,000; year 2, IDR 49,000,000; and in each of years 3 through 5, IDR 21,000,000 per year. The existing printing machine has a book value of IDR 70,000 and a remaining useful life of 5 years. However, the existing equipment can be sold for only IDR 25,000,000 and is being depreciated using the straight-line method over its actual life. Marketing team has provided comparative printing cost data as follow: Current Machine New Machine Machine Available per…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Depreciation -MACRS; Author: Ronald Moy, Ph.D., CFA, CFP;https://www.youtube.com/watch?v=jsf7NCnkAmk;License: Standard Youtube License