Please show all steps An asset in the amount of $500,000 was purchased on Januar

Question

Please show all steps

An asset in the amount of $500,000 was purchased on January 1, 2013. For tax purposes, it is a 5 year asset and they use the half year convention. For financial reporting they use the straight-line method of depreciation and are depreciating it over 8 years. Below is the depreciation expenses by year: Pretax financial accounting income for 2013 was $1,250,000 and for 2014 it was $945,000. In 2014, they earned tax-exempt interest of $110,000. Their tax rate is 30% for 2013 and all future years. Prepare the journal entries for 2013 and 2014 to record income tax expense.

Explanation / Answer

2013
Income tax exp Dr 375,000 ( 1,250,000*30%)
Deffered tax Asset Dr 3,750(12,500*30%)
To Income tax payable 378,750

2014

Income tax Exp Dr 283,500(945000*30%))
To Deffered tax Asset 3,750
To Deffered tax liab 40,500
To Income tax payable 239,250
(Taxable Income = 945,000 - 1100000 -37500)= 797500*30% = 239,250)

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.