Question
Caroline Company began operations in 2018. The company reported $128,000 of depreciation expense on its income statement in 2018 and $84,000 in 2019. On its
Caroline Company began operations in 2018. The company reported $128,000 of depreciation expense on its income statement in 2018 and $84,000 in 2019. On its tax returns, the company deducted $192,000 for depreciation in 2018 and $112,000 in 2019. The 2019 tax return shows a tax obligation (liability) of $132,000 based on a 25% tax rate. A. What is the temporary difference between the book value of depreciable assets and the tax basis of these assets at the end of 2018? B. What is the temporary difference between the book value of depreciable assets and the tax basis of these assets at the end of 2019? C. How much deferred tax liability will Caroline report at the end of 2018? D. What is Carolines deferred tax liability at the end of 2019? E. What is Carolines income tax expense for 2019?
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