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  3. 2. use the information from problem 11 5 a. dete

2. Use the information from Problem 11 5 a. Determine the balance of...

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Accounting

2. Use the information from Problem 11 5

a. Determine the balance of the Deferred Tax Asset or Liability account at the end of each year

b. Prepare the journal entry to record the tax provision for year 2 & year 5.

c. If a new income tax rate of 35% is enacted into law at the end of year 4, what would be the revised value of the deferred tax asset or liability?

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Year P5. Temporary Differences, Deferred Tax Liabilities, Change in Tax Rates. Kimm-Mills Incorporated (KMI) acquired a piece of equipment at a total cost of $5,400,000. KMI uses the straight-line method of depreciation for financial reporting purposes and an accelerated r.ethod for tax purposes. The asset has a 6-year life for book purposes and for tax purposes. There is to estimated scrap value. KMI is subject to a 40% tax rate. We present the incorre and depreciation surr.ary for both tax ard GAAP. Income before Tax Tax and Depreciation Depreciation GAAP Depreciation $1,200,000 $1,080,000 $ 900,000 1,880,000 1,728,000 900,000 1,980,000 1,036,800 900,000 2,100,000 622,080 900,000 1,750,000 622,080 900,000 1,200,500 311,040 900,000 Totals $5,400,000 $5,400,000 1 2 3 4 5 6

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