Question

Parry Corp. acquired new equipment for $1,200,000 in 20X6. For accounting purposes, the equipment will be depreciated over five years, straight-line, with a full year’s depreciation in the first year. For income tax purposes, Parry can take CCA over the next three years of $120,000 in 20X6, $216,000 in 20X7, and $175,000 in 20X8. Parry’s income tax rate is 34%.

Required:
For each 31 December 20X6 through 20X8, determine: (Enter your answers in thousands.)

1. The tax basis for the equipment.

2. The accounting basis for the equipment.

3. The cumulative amount of the temporary difference relating to the equipment.

4. The balance of deferred income tax asset or liability that would be reported on the statement of financial position. (Round your answer to 2 decimal places.)

5. The amount of the deferred income tax adjustment. (Round your answer to 2 decimal places.

Answer 1

Tax Bania for the equipment Tim thole aind) Yeage 20x6 $120 - Year 2007 - $216 - year 20x8 8 175- Accounting_Benia Jone the Equifrarmt Depreciation per year 1200 28 240 year (8 im thousand - 2016 240 V 20x7 240 2018 240/ 3. cumulative amount o Ter bozory_River mu Year Account Basis Tay Bata Cum Temporary Dillerense 20x6 240 120 20 20x7 240 216 144 2018 240 195 209 Liability 4. Duerred 4mcome Tax Asser or Liability Meer Cumulative Tecamp Brary Difference Diferred 120 40.80/ 20x7 144 20x8 71.06- 20x6 48.96 209 Dojeved 4mcome Tax Ad, us homens Year Deferred Tax Liability typese 40.80 20x7 48.96 20 X9 71.06 20x6 Tax Adjustment 40.80 8.16 48.9 - 40-80) 22.10471.06 - 98.96)