Garfield Inc. purchased a machine for $20,000 in January 2013. Garfield records
ID: 2448628 • Letter: G
Question
Garfield Inc. purchased a machine for $20,000 in January 2013.Garfield records a full year depreciation on assets in the year of purchase, and their year ends Dec 31.For financial reporting purposes, Garfield depreciates the machine on a straight line basis over a four year period. There is no residual value. For tax purposes, depreciation expense on the machinery is 50% of cost in 2013, 30% in 2014 and 20% in 2015. Pretax accounting income for 2013 was $150,000, which includes interest revenue of $20,000 from municipal bonds. The enacted tax rate is 30% for all years. There are no differences between accounting and taxable income.
Current income taxes payable at December 31,2013 are;
A)$45,000
B)$42,000
C)$43,500
D)$37,500
Explanation / Answer
pre tax accounting income - 150,000
Add Depreciation as per Accounting 5000 [20000/4]
less:Depreciation as per Income tax (10000) [20000*.50]
less:;interest revenue (20000) [tax free]
Adjusted income before tax 125000
:Income tax payable 37500 [125000.30]
correct option is "D"
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