1. Palace Casinos recently acquired a newly built hotel and casino in Atlantic City. The cost of the complex was $6,000,000, with a six-year useful life and no residual value expected. Palace depreciates its buildings using the straight-line method for financial reporting and an accelerated method for tax purposes. The tax depreciation percentages for the first two years are 20% and 32%, respectively. Palace is subject to a 35% income tax rate Read the requirements Requirement a. Assuming that year 2 income before tax and depreciation is $3,800,000, determine the year 2 income tax payable, the deferred tax provision, and income tax expense. Begin by completing the table below to compute book and tax depreciation through year 2. Depreciation Expense Accumulated Depreciation Basis Book-Tax Year Book Tax Book Book Tax Difference Select the labels and enter the amounts to compute Palace's income taxes payable for year 2. (Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Taxes Payable (1) Income before income taxes e depreciation |(2) Tax depreciation (3) Taxable income |(4) Tax Rate Income taxes payable Now select the labels and enter the amounts to compute Palace's income tax expense for year 2. (Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Tax Expense (6) Income before income taxs & depreciation |(7) BOOK Depreciation |(8) Income before income taxes |(9) Tax Rate Income tax expense . which is the difference between In year 2, Palace will record a deferred tax provision of $ L (11)-the ending and beginning deferred to liability balances Requirement b. Compute the deferred tax account on the balance sheet at the end of year 2 and indicate if the balance represents a deferred tax asset or a deferred tax liability. Prepare the tax accrual journal entry for year 2 At the end of year 2, Palace will report a deferred tax (12) of $ liability Prepare the tax accrual journal entry for year 2. (Record debits first, then credits. Exclude explanations from any journal entries.) Year 2 Account (13) Income Tax Expense (14) Income Taxes parade |(15) Deferred tax liability (16) 1: Requirements a. Assuming that year 2 income before tax and depreciation is $3,800,000, determine the year 2 income tax payable, the deferred tax provision, and income tax expense. b. Compute the deferred tax account on the balance sheet at the end of year 2 and indicate if the balance represents a deferred tax asset or a deferred tax liability. Prepare the tax accrual journal entry for year 2
