70.2K

Verified Solution

Link Copied!

At the beginning of $2019,$ its first year of operations, Cooke Company purchased an asset for $$100,000.$ This asset has an $8-$year economic life with no residual value, and it is being depreciated by the straight$-$line method for financial reporting purposes. For tax purposes, however, the asset is being depreciated using the MACRS $(200\%,5-$year life$)$ method.difference at the end of each year.

Schedule InstructionsPrepare a schedule that computes for each year, $2019$ through $2026,($a$)$ the ending deferred tax liability and $($b$)$ the change in the deferred tax liability.

Schedule Instructions

COOKE COMPANY

Change in Deferred Tax Liability

$2019$ through $2026$

difference at the end of each year.

Schedule Instructions

COOKE COMPANY

Depreciation & Tax Differences

$2019$ through $2026$

During $2019,$ Cooke reported pretax financial income of $$51,500$ and taxable income of $$44,000.$ The depreciation temporary difference caused the difference between the two income amounts. The tax rate in $2019$ was $30\%,$ and no change in the tax rate had been enacted for future years.

Required:

$1.$ Prepare a schedule that shows for each year, $2019$ through $2026,($a$)$ MACRS depreciation, $($b$)$ straight$-$line depreciation, $($c$)$ the annual depreciation temporary difference, and $($d$)$ the accumulated temporary difference at the end of each year.

$2.$ Prepare a schedule that computes for each year, $2019$ through $2026,($a$)$ the ending deferred tax liability and $($b$)$ the change in the deferred tax liability.

$3.$ Prepare Cooke$$s income tax journal entry at the end of $2019.$

$4.$ Next Level Explain what happens to the balance of the deferred tax liability at the end of $2019$ through $2026.$

difference at the end of each year.

Schedule InstructionsPrepare a schedule that computes for each year, $2019$ through $2026,($a$)$ the ending deferred tax liability and $($b$)$ the change in the deferred tax liability.

Schedule Instructions

COOKE COMPANY

Change in Deferred Tax Liability

$2019$ through $2026$Prepare Cooke's income tax journal entry on December $31,2019.$

General Journal Instructions

PAGE $1$

GENERAL JOURNAL

$\backslash$table$[[,$DATE,ACCOUNT TITLE,POST. REF.,DEBIT,CREDIT$],[1,$Dec. $31,$Income Tax Expense,,$15,450\mathrm{.}00,],[2,,$Deferred Tax Liability,,$2,250\mathrm{.}00,],[3,,$Income Taxes Payable,,$13,200\mathrm{.}00,]]$

Answer & Explanation Solved by verified expert

See Answer