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Example 2-Deferred Tax Liability from Depreciation Co urts Temporary Services reported pretax accounting income in...

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Accounting

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Example 2-Deferred Tax Liability from Depreciation Co urts Temporary Services reported pretax accounting income in 2016, 2017, 2018, and 2019 of $100 reporting ses over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is deducted (by MACRS) over 2016-2019 as follows: $33 million, $44 million, $15 million, and $8 million. million. In 2016, an asset was acquired for $100 million. The asset is depreciated for financial re No other depreciable assets were acquired. The enacted tax rate is 40% each year. Step 1: Find Taxable Income and cash tax owed each year affected by asset purchase 2016 2017 2018 2019 Total Step 2: Look at the net temporary differences in each book the deferred tax liability based on the future taxes owed year generated from the 2016 event. We need to Step 3: Now we can make the journal entry recording book tax expense for all four years

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