On January 1, 2011 ACME Company purchased a building for $45million. ACME deprec

Question

On January 1, 2011 ACME Company purchased a building for $45million. ACME depreciates the building using straight line for financial accounting and uses MACRS for its tax return. On December 31, 2014 ACME’s building had a book value of $36 million and a tax basis of $20million. On December 31, 2015 ACME’s building had a book value of $33million and a tax basis of $16million. ACME has no other temporary or permanent differences, and is in a 30% tax bracket. In 2015, ACME shows income before income taxes of $7million.

Make the journal entry ACME makes for income taxes

What is ACME’s income after taxes.

Explanation / Answer

On January 1, 2011 ACME Company purchased a building for $45million. ACME deprec

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