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 Year Book Tax Book Tax Book Book-Tax Difference Tax 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) (4) 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) (8) Income tax expense L , which is the difference between In year 2, Palace will record a deferred tax provision of $ (11) 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 $ Prepare the tax accrual journal entry for year 2. (Record debits first, then credits. Exclude explanations from any journal entries.) Account Year 2 (13) (14) (15) (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 (1) O O Book depreciation Income after income taxes O Income before income taxes and depreciation Tax depreciation Tax rate O Taxable income (2) Book depreciation Income after income taxes Income before income taxes and depreciation Tax depreciation Tax rate Taxable income (3) O Book depreciation O Income after income taxes Income before income taxes and depreciation Tax depreciation Tax rate Taxable income (5) O Tax depreciation Tax rate Taxable income $2,800,000 $3,800,000 Book depreciation Income after income taxes Income before income taxes and depreciation 20% 32% 35% Taxable income (6) O O Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable Tax depreciation Tax rate Taxable income Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable Tax depreciation Tax rate Taxable income (8) O O Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable O Tax depreciation Tax rate Taxable income (9) O O Book depreciation Income after income taxes Income before income taxes O Income before income taxes and depreciation O Income taxes payable Tax depreciation Tax rate (10) O 20% O 32% O 35% $2,800,000 O $3,800,000 (11) the ending and beginning deferred tax liability balances. the ending and beginning deferred tax asset balances. the income tax expense and the ending deferred tax asset balance. the income tax expense and the ending deferred tax liability balance. the income taxes payable and the ending deferred tax asset balance. the income taxes payable and the ending deferred tax liability balance. (13) (12) O O asset O liability Deferred Revenue O Deferred Tax Asset O Deferred Tax Liability Income Tax Expense O Income Taxes Payable Retained Earnings Sales Revenue (14) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability Income Tax Expense Income Taxes Payable Retained Earnings O Sales Revenue (15) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability Income Tax Expense Income Taxes Payable O Retained Earnings Sales Revenue (16) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability O Income Tax Expense O Income Taxes Payable Retained Earnings O Sales Revenue 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 Year Book Tax Book Tax Book Book-Tax Difference Tax 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) (4) 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) (8) Income tax expense L , which is the difference between In year 2, Palace will record a deferred tax provision of $ (11) 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 $ Prepare the tax accrual journal entry for year 2. (Record debits first, then credits. Exclude explanations from any journal entries.) Account Year 2 (13) (14) (15) (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 (1) O O Book depreciation Income after income taxes O Income before income taxes and depreciation Tax depreciation Tax rate O Taxable income (2) Book depreciation Income after income taxes Income before income taxes and depreciation Tax depreciation Tax rate Taxable income (3) O Book depreciation O Income after income taxes Income before income taxes and depreciation Tax depreciation Tax rate Taxable income (5) O Tax depreciation Tax rate Taxable income $2,800,000 $3,800,000 Book depreciation Income after income taxes Income before income taxes and depreciation 20% 32% 35% Taxable income (6) O O Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable Tax depreciation Tax rate Taxable income Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable Tax depreciation Tax rate Taxable income (8) O O Book depreciation Income after income taxes Income before income taxes Income before income taxes and depreciation Income taxes payable O Tax depreciation Tax rate Taxable income (9) O O Book depreciation Income after income taxes Income before income taxes O Income before income taxes and depreciation O Income taxes payable Tax depreciation Tax rate (10) O 20% O 32% O 35% $2,800,000 O $3,800,000 (11) the ending and beginning deferred tax liability balances. the ending and beginning deferred tax asset balances. the income tax expense and the ending deferred tax asset balance. the income tax expense and the ending deferred tax liability balance. the income taxes payable and the ending deferred tax asset balance. the income taxes payable and the ending deferred tax liability balance. (13) (12) O O asset O liability Deferred Revenue O Deferred Tax Asset O Deferred Tax Liability Income Tax Expense O Income Taxes Payable Retained Earnings Sales Revenue (14) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability Income Tax Expense Income Taxes Payable Retained Earnings O Sales Revenue (15) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability Income Tax Expense Income Taxes Payable O Retained Earnings Sales Revenue (16) O O Deferred Revenue O Deferred Tax Asset Deferred Tax Liability O Income Tax Expense O Income Taxes Payable Retained Earnings O Sales Revenue