Zekany Corporation would have had identical income before taxes on both its inco
ID: 2416717 • Letter: Z
Question
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2013 through 2016 except for differences in depreciation on an operational asset. The asset cost $250,000 and is depreciated for income tax purposes in the following amounts:
The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes.
Income amounts before depreciation expense and income taxes for each of the four years were as follows.
Assume the average and marginal income tax rate for 2013 and 2014 was 30%; however, during 2014 tax legislation was passed to raise the tax rate to 40% beginning in 2015. The 40% rate remained in effect through the years 2015 and 2016. Both the accounting and income tax periods end December 31.
Prepare the journal entries to record income taxes for the years 2013 through 2016. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2013 through 2016 except for differences in depreciation on an operational asset. The asset cost $250,000 and is depreciated for income tax purposes in the following amounts:
Explanation / Answer
2013 2014 2015 2016 Accounting income before taxes and depreciation $ 135000 $ 155000 $ 145000 $ 145000 Depreciation 82,500 110,000 37,500 20,000 52,500 45,000 107,500 125,000 30% 40% 40% 40% Tax 15750 18000 43000 50000 1 Income tax A/c Dr 15750 To provision for tax A/c 15750 ( Being provision created for outstanding Tax) 1 Provisoin for Tax A/c 15750 To Cash / Bank A/c 15750 ( Being tax amout paid ) 2 Income tax A/c Dr 18000 To provision for tax A/c 18000 ( Being provision created for outstanding Tax) 2 Provisoin for Tax A/c 18000 To Cash / Bank A/c 18000 ( Being tax amout paid ) 3 Income tax A/c Dr 43000 To provision for tax A/c 43000 ( Being provision created for outstanding Tax) 3 Provisoin for Tax A/c 43000 To Cash / Bank A/c 43000 ( Being tax amout paid ) 4 Income tax A/c Dr 50000 To provision for tax A/c 50000 ( Being provision created for outstanding Tax) 4 Provisoin for Tax A/c 50000 To Cash / Bank A/c 50000 ( Being tax amout paid )
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