Staples Corporation would have had identical pretax income on both its income tax returns and...

60.1K

Verified Solution

Question

Accounting

image
image
image
image
Staples Corporation would have had identical pretax income on both its income tax returns and its income statements for Year 1 through Year 4 except for a depreciable asset that cost $480,000. The asset was depreciated for income tax purposes at the following amounts: Year 1,\$192,000; Year 2,\$144,000; Year 3, \$96,000; and Year 4, $48,000. However, for accounting purposes the straight-line method was used, resulting in $120,000 per year. The accounting and tax periods both end December 31. There were no deferred taxes at the beginning of Year 1. The depreciable asset has a four-year estimated life and no residual value. The tax rate for each year was 25\%. Pretax GAAP income for each of the four years follows. Required Financial Statement Presentation a. Compute the increase to income tax payable on December 31 of Year 1, Year 2, Year 3, and Year 4. a. Compute the increase to income tax payable on December 31 of Year 1, Year 2, Year 3, and Year 4. b. Prepare a schedule to compute the deferred tax balance on December 31 of Year 1, Year 2, Year 3 , and Year 4. - Note: Do not use negative signs with your answers. \begin{tabular}{|c|c|c|c|c|} \hline Date & Account Name & & Dr. & Cr. \\ \hline \multirow[t]{4}{*}{ Dec. 31, Year 1} & Deferred Tax Asset & & 0 & 0 \\ \hline & Income Tax Receivable & & 0 & 0 \\ \hline & Liability for Unrecognized Tax Benefits & + & 0 & \\ \hline & To record income tax expense & & & \\ \hline \multirow[t]{4}{*}{ Dec. 31, Year 2} & Valuation Allowance for Deferred Tax Asset & & 0 & 0 \\ \hline & Deferred Tax Asset & & 0 & 0 \\ \hline & Income Tax Payable & & 0 & 0 \\ \hline & To record income tax expense & & & \\ \hline \multirow[t]{4}{*}{ Dec. 31 , Year 3} & Deferred Tax Liability & & 0 & 0 \\ \hline & Valuation Allowance for Deferred Tax Asset & ^ & 0 & 0 \\ \hline & Income Tax Receivable & = & 0 & 0 \\ \hline & To record income tax expense & & & \\ \hline \multirow[t]{4}{*}{ Dec. 31, Year 4} & Income Tax Payable & & 0 & 0 \\ \hline & Cash & & 0 & , \\ \hline & Deferred Tax Asset & & 0 & 0 \\ \hline & To record income tax expense & & & \\ \hline \end{tabular} d. For each year show how the deferred income tax amount would be reported on the balance sheet. e. Prepare the income tax section of the income statement for Year 1 and provide the disclosure of current and deferred tax expense. - Note: Do not use negative signs with your answers

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students