Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

K. Shuman purchased a landscape maintenance firm on 1/2/20X1 and renamed the firm Shuman Enterprises. Information regarding the firm for the first two years of

K. Shuman purchased a landscape maintenance firm on 1/2/20X1 and renamed the firm Shuman Enterprises. Information regarding the firm for the first two years of operation is shown below: a. Pretax GAAP income was $100,000 in 20X1 and $150,000 in 20X2. b. Heavy equipment acquired in the purchase was valued at $120,000. The equipment had a life of 4 years and no salvage value. Depreciation for tax purposes was $48,000 in 20X1 and $36,000 in 20x2. Depreciation for GAAP purposes was $30,000 in each year. c. In 20X2, pretax GAAP income included $12,500 of interest on State of Indiana Bonds. This interest is not taxable for U.S. federal purposes. d. During 20X1, $40,000 was collected in advance for landscape maintenance to be performed in 20X2. This amount was included in 20X1 taxable income but was not included in GAAP income until 20X2. In 20X2, $25,000 was collected in advanced for work to be performed in 20X3. This amount was recognized as income for tax purposes in 20X2 but will not be recognized as income for GAAP purposes until 20X3. e. The enacted tax rate for 20X1 was 21%. The newly enacted tax rate for 20X2 and subsequent years is 25%. f. At December 31, 20X1, the Deferred tax asset account had a $12,000 debit balance, and the Deferred tax liability account had a $5,400 credit balance. Required: 1. Compute Shuman's GAAP Income tax expense for the year ended December 31, 20X2.
image text in transcribed
below: a. Pretar CAMP income was $100000 in 201 and $150,000 an 202. $36000 in 2000 Depredation for GAMP ourposes was $30000 in each year. recognited as incorte for GAMP purposes una 203 Requlred: tCompute Shaman's CAMP income tar expense for the year ended Decamber 31, 202

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technical Analysis Of Stock Trends

Authors: Robert D. Edwards, John Magee, W.H.C. Bassetti

8th Edition

0814406807, 978-0814406809

More Books

Students also viewed these Finance questions

Question

Explain the qualities associated with a profession

Answered: 1 week ago

Question

2. Does your tone of voice vary with different students?

Answered: 1 week ago