Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PROBLEMA partial credit Techno Winery, LTD purchased a piece of equipment on January 1, 2015 for $34,000,000. Management estimates that the equipment will have a

image text in transcribed
PROBLEMA partial credit Techno Winery, LTD purchased a piece of equipment on January 1, 2015 for $34,000,000. Management estimates that the equipment will have a useful life of eight years and a $4,000,000 salvage value. The depreciation expense recorded for tax purposes is computed using the double-declining balance method of depreciation. The company uses the straight-line method of depreciation for reporting purposes. The company's fiscal year from January 1 to December 31. Calculate the amount of depreciation expense for reporting purposes for the year ending December 31, 2020 (i.e., the 6th full year of depreciation). Then calculate the amount of depreciation expense for tax purposes for the year ending December 31, 2020 (i.e., the 6 full year of depreciation). Use this information to determine the correct answers to the following two (2) questions: 1. Will a deferred tax asset or a deferred tax liability be created for the year ending December 31, 2020 as a result of the depreciation recorded for tax and financial reporting purposes? a. Deferred tax asset b. Deferred tax liability 2. According to the Double Declining Balance depreciation schedule that Techno Winery, LTD used compute depreciation expense for tax purposes, what was the ending book value of this piece of equipment on December 31, 2017? Record your answer as a dollar amount rounded to zero (0) decimal places, but do not include the dollar sign or any commas. 3. According to the Straight-Line method of depreciation that Techno Winery, LTD used compute depreciation expense for reporting purposes, what was the ending book value of this piece of equipment on December 31, 2019? Record your answer as a dollar amount rounded to zero (0) decimal places, but do not include the dollar sign or any commas. 4. Assuming that the company's tax rate is 21%, what dollar amount (as an absolute value) will be added (if your answer to the prior question was "a") or subtracted (if your answer to the prior question was "b) to the ence? deferred tax account on the December 31, 2020 balance sheet as a result of the depreciation timing diff Record your answer as a dollar amount rounded to zero (O) decimal places, but do not include the dollar sign or any commas

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_2

Step: 3

blur-text-image_3

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

Frank Woods Business Accounting Volume 1

Authors: Alan Sangster Lewis Gordon Frank Wood

14th Edition

1292208627, 9781292208626

More Books

Students also viewed these Accounting questions