Question

On January 1, 2013, Ameen Company purchased a building for $62 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2017, the book value of the building was $56 million and its tax basis was $46 million. At December 31, 2018, the book value of the building was $54 million and its tax basis was $39 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2018 was $35 million.

Required:
1. Prepare the appropriate journal entry to record Ameen’s 2018 income taxes. Assume an income tax rate of 40%.
2. What is Ameen’s 2018 net income?

Answer 1

Above question is related to tax payable of ameen for the year 2018.

Refer below images for more clarity and solution is available at best.
Given Book Value And of building as on 31/12/17 = $56M its tax basis ason 31/12/17 = $ 46M luven Book value of building as on 3i112118 = $54M And its tax basis as on 31112/18 - $39M liven Pretax Accounting income for 2018 - $359 - Depreciation as per Book value = opening written down value Less ... Closing written down value = $56M - $549 - $25 Depreciation as per Tax laws - Opening Tax baris Less closing tax basis - $46M - $39 m = $7M Since depreciation, Tax these Deprecation is greater than Book will be deferred tax liability o & Taxable income - pretax income + Dep as per book valve . - Dep as per tax laws = $350 + $ 2H - $77 = $30M

* Income Tax expense Tax Rate - pretax incone & = $35m x 4810 = $ 14H 1. Journal ently to record Ameen's 2018 income taxes: $12M Tax expense tlc of $ 149 (13544404-) To Tax payable Ale ($30M X 48%) To Deferred tax liability All lance Figure) (Being tax liability recorded) $an 2. Ameen's 2018 net income : Net income = pretax income – Tax expense = $ 354 - $149 = $ 21M Notes : 1. In the above solution 'Me represents Million.