Question

Company C started business on January 1, 20X1, and bought the following piece of equipment. Cost of asset $700,000 Salvage 70,000 Useful life 5 Tax rate 21% 20X1 estimated tax payment 14,000 Depreciation for book and tax purposes is as follows: Book Tax 20X1 126,000 280,000 20X2 126,000 168,000 20X3 126,000 100,800 20X4 126,000 60,480 20X5 126,000 20,720 20X1 income statement information: Sales 1,267,000 Expenses (does not include depreciation expense and tax expense) 760,000 What is the ending balance of deferred taxes payable-depreciation on the December 31, 20X1 balance sheet?

Answer 1

Balance Sheet Ending balance of deferred taxes payable-depreciation (December 31st, 20X1) $32,340 Working notes: Book of accounts Book value Depreciation Accumulated depreciation Net book value 20X1 $700,000 $126,000 $126,000 $574,000 20X2 20x3 $700,000 $700,000 $126,000 $126,000 $252,000 $378,000 $448,000 $322,000 20X4 20x5 $700,000 $700,000 $126,000 $126,000 $504,000 $630,000 $196,000 $70,000 Taxation Book value Depreciation Accumulated depreciation Net book value Year 1 $700,000 $280,000 $280,000 $420,000 Year 2 Year 3 $420,000 $252,000 $168,000 $100,800 $448,000 $548,800 $252,000 $151,200 Year 4 $151,200 $60,480 $609,280 $90,720 Year 5 $90,720 $20,720 $630,000 $70,000 Difference in NBV Deferred tax liability (at 21%) -$154,000 $196,000-$170,800 $105,280 -$32,340 -$41,160 -$35,868 -$22,109 Answer $0 $0