1 Assume the following facts for RTY Corporation for Year 1 RTY recorded $2,300,000 of book income At the end of the year, RTY had accumulated depreciation for book purposes of $100,000 and accumulated depreciation for tax purposes of $150,000 As of the beginning of the year, the accumulated book and tax depreciation balances were $80,000 and $120,000, RTY paid premiums for officer life insurance of $50,000 RTY established a warranty reserve of $15,000 RTYs reserve for obsolete inventory decreased from $37,500 to $19,500 Assume a statutory income tax rate of 25 percent a What are RTY's permanent items Premiums for officer life insurance $50,000 b What are RTY's changes in temporary differences Warranty reserve $15,000 Accumulated depreciation 10,000 Reserve for obsolete inventory (37,500 19,500) $18,000 $23,000 25 $5,750 c What is RTY's current tax liability $2,300,000 $50,000 $23,000 2,373,000 25 $593,250 d What is the journal entry to record RTY's current tax liability Current Tax Expense $593,250 Current Tax Liability $593,250 e What is the temporary difference related to depreciation at the end of Year 1 Is it a deductible temporary difference or a taxable temporary difference Beg Difference $80,000 (book) $120,000(tax) End Difference $100,000 (book) $150,000(tax) Current year change $40,000 $50,000 The temporary difference related to depreciation at the end of Y1 is $10,000 Accumulated depreciation is a taxable temporary difference (Taxable temporary differences are those on which tax will be charged in the future when the asset (or liability) is recovered (or settled) f What amount of deferred tax asset or liability should be recorded at year end related to depreciation 25 g What is the journal entry to book deferred tax expense Deferred Tax Asset $5,750 Deferred Tax Expense $5,750 h What is the total provision for income tax $593,250 $5,750 $599,000 Q Are my answers accurate If not, can you please give a brief description on why not

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1  Assume the following facts for RTY Corporation for Year 1  RTY recorded $2,300,000 of book income  At the end of the year, RTY had accumulated depreciation for book purposes of $100,000 and accumulated depreciation for tax purposes of $150,000  As of the beginning of the year, the accumulated book and tax depreciation balances were $80,000 and $120,000, RTY paid premiums for officer life insurance of $50,000 RTY established a warranty reserve of $15,000 RTYs reserve for obsolete inventory decreased from $37,500 to $19,500 Assume a statutory income tax rate of 25 percent a  What are RTY's permanent items  Premiums for officer life insurance $50,000 b  What are RTY's changes in temporary differences  Warranty reserve $15,000 Accumulated depreciation  10,000  Reserve for obsolete inventory (37,500 19,500) $18,000 $23,000   25  $5,750 c  What is RTY's current tax liability  $2,300,000   $50,000   $23,000  2,373,000   25   $593,250 d  What is the journal entry to record RTY's current tax liability  Current Tax Expense $593,250 Current Tax Liability $593,250 e  What is the temporary difference related to depreciation at the end of Year 1  Is it a deductible temporary difference or a taxable temporary difference  Beg  Difference  $80,000 (book)  $120,000(tax)  End  Difference  $100,000 (book)  $150,000(tax)  Current year change  $40,000  $50,000  The temporary difference related to depreciation at the end of Y1 is $10,000  Accumulated depreciation is a taxable temporary difference  (Taxable temporary differences are those on which tax will be charged in the future when the asset (or liability) is recovered (or settled)  f  What amount of deferred tax asset or liability should be recorded at year end related to depreciation   25   g  What is the journal entry to book deferred tax expense  Deferred Tax Asset $5,750 Deferred Tax Expense $5,750 h  What is the total provision for income tax  $593,250  $5,750 $599,000 Q  Are my answers accurate  If not, can you please give a brief description on why not

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1. Assume the following facts for RTY Corporation for Year 1. RTY recorded $2,300,000 of book income. At the end of the year, RTY had

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