3. Live Long Clothing, Inc. acquired a new fabric-cutting machine at the beginning of the current year. The machine cost $450,000, with no residual value expected. Live Long uses the straight-line method for financial reporting assuming a six-year useful life. 1(Click the icon to view the data.) The company is subject to a 35% income tax rate and has no other book-tax differences. We present Live Long's income before tax and depreciation below: 2(Click the icon to view the data.) Read the requirements Requirement a. Prepare all journal entries required to record Live Long's income tax provision for years 3 and 4. Begin by completing the table below to compute book and tax depreciation through year 4. Depreciation Expense Straight-line MACRS Accumulated Depreciation Straight-line MACRS Basis Straight-line Book-Tax Difference Year MACRS Now select the labels and enter the amounts to compute Live Long's income tax payable for years 3 and 4. (Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Taxes Payable Year 3 Year 4 (1) (2) (3) (4) Income taxes payable Select the labels and enter the amounts to compute Live Long's income tax expense for years 3 and 4.(Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Tax Expense Year 3 Year 4 |(10) Income tax expense Now prepare the journal entry required to record Live Long's income tax provision for year 3. (Record debits first, then credits. Exclude explanations from any journal entries.) Year 3 Account (13) (14) (15) (16) Prepare the journal entry required to record Live Long's income tax provision for year 4. (Record debits first, then credits. Exclude explanations from any journal entries.) Year 4 Account (17) (18) (19) (20) Requirement b. What is the balance of the deferred tax account at the end of year 3? At the end of year 3, Live Long reports a (21) of $ Requirement c. What is reported net income for years 3 and 4? Select the labels and enter the amounts to compute Live Long's reported net income for years 3 and 4. (Use parentheses or a minus sign for numbers to be subtracted.) Year 3 Year (22) (23) (24) (25) Net income 1: Data Table The firm classifies the equipment as five-year MACRS property for tax purposes using the following percentages. Year MACRS % 20.00 % 32.00% 19.20 % 11.52 % 11.52 % 5.76 % 2: Data Table Year Income Before Tax and Depreciation 875,000 885,000 920,000 1,000,000 1,275,000 1,700,000 3: Requirements a. Prepare all journal entries required to record Live Long's income tax provision for years 3 and 4. b. What is the balance of the deferred tax account at the end of year 3? C. What is reported net income for years 3 and 4? 3. Live Long Clothing, Inc. acquired a new fabric-cutting machine at the beginning of the current year. The machine cost $450,000, with no residual value expected. Live Long uses the straight-line method for financial reporting assuming a six-year useful life. 1(Click the icon to view the data.) The company is subject to a 35% income tax rate and has no other book-tax differences. We present Live Long's income before tax and depreciation below: 2(Click the icon to view the data.) Read the requirements Requirement a. Prepare all journal entries required to record Live Long's income tax provision for years 3 and 4. Begin by completing the table below to compute book and tax depreciation through year 4. Depreciation Expense Straight-line MACRS Accumulated Depreciation Straight-line MACRS Basis Straight-line Book-Tax Difference Year MACRS Now select the labels and enter the amounts to compute Live Long's income tax payable for years 3 and 4. (Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Taxes Payable Year 3 Year 4 (1) (2) (3) (4) Income taxes payable Select the labels and enter the amounts to compute Live Long's income tax expense for years 3 and 4.(Use parentheses or a minus sign for numbers to be subtracted.) Computation of Income Tax Expense Year 3 Year 4 |(10) Income tax expense Now prepare the journal entry required to record Live Long's income tax provision for year 3. (Record debits first, then credits. Exclude explanations from any journal entries.) Year 3 Account (13) (14) (15) (16) Prepare the journal entry required to record Live Long's income tax provision for year 4. (Record debits first, then credits. Exclude explanations from any journal entries.) Year 4 Account (17) (18) (19) (20) Requirement b. What is the balance of the deferred tax account at the end of year 3? At the end of year 3, Live Long reports a (21) of $ Requirement c. What is reported net income for years 3 and 4? Select the labels and enter the amounts to compute Live Long's reported net income for years 3 and 4. (Use parentheses or a minus sign for numbers to be subtracted.) Year 3 Year (22) (23) (24) (25) Net income 1: Data Table The firm classifies the equipment as five-year MACRS property for tax purposes using the following percentages. Year MACRS % 20.00 % 32.00% 19.20 % 11.52 % 11.52 % 5.76 % 2: Data Table Year Income Before Tax and Depreciation 875,000 885,000 920,000 1,000,000 1,275,000 1,700,000 3: Requirements a. Prepare all journal entries required to record Live Long's income tax provision for years 3 and 4. b. What is the balance of the deferred tax account at the end of year 3? C. What is reported net income for years 3 and 4
