Question

Company B acquired the following piece of equipment. Your staff accountant computed the book and tax depreciation. It is up to you to determine the deferred tax amounts. Equipment cost $50,000 Salvage 5,000 Useful life 5 Tax rate 21% Depreciation for book and tax purposes is as follows: Book Tax 20X1 9,000 20,000 20X2 9,000 12,000 20X3 9,000 7,200 20X4 9,000 4,320 20X5 9,000 1,480 What is the deferred taxes payable balance as of December 31, 20X3?

Answer 1

Answer:

$2,562

Explanation:

Excess tax depreciation 20X1 = 20,000 - 9,000 = $11,000

Excess tax depreciation 20X2 = 12,000 - 9,000 = $3,000

Excess tax depreciation 20X3 = 7,200 - 9,000 =   ($1,800)

Total Excess tax depreciation                                   $12,200

Deferred taxes payable balance,Dec 31. 20X3 = Total Excess tax depreciation *  Tax rate = $12,200 * 21% = $2,562 Credit