Question 3. (25%) On July 1, 2018, Kazuyuki Corporation purchased an equipment for $90,000. At the time of purchase, the equipment had an estimated useful life of 4 years and an estimated residual value of $10,000. The equipment was bought from a vendor on a remote island, and Kazuyuki had to pay a special sales tax of $20,000 for the purchase. The transportation cost was $50,000. However, the equipment was damaged during transportation and it cost $50,000 to make the necessary repairs to the equipment. Government environmental regulations encouraged modifications to the equipment costing $20,000, which Kazuyuki paid for. All of the transactions were made in cash. On 1 April 2021, Kazuyuki Corporation sold the equipment for $40,000 in cash. 3.1 Make the necessary journal entries to record the transactions related to the purchase of the equipment. 3.2 Make the necessary journal entries to record the transactions related to the sale of the asset assuming Kazuyuki Corporation used the straight-line depreciation method. 3.2 Make the necessary journal entries to record the transactions related to the sale of the asset assuming Kazuyuki Corporation used the double-declining depreciation method. Kazuyuki Corporation has only one customer. Each quarter, the revenue is $60,000 in cash for products delivered. In addition to the machine, each quarter, Kazuyuki Corporation spends $18,000 cash on salaries and $24,000 cash on rent. Corporate tax rates are 20% for each year. 3.3 Prepare the net income before tax expense reported publicly in the financial statements using the straight- line depreciation method for each calendar year 2018 through 2021. 3.4 Prepare the taxable income reported privately to the tax authorities using the double-declining depreciation method for each calendar year 2018 through 2021. Question 3. (25%) On July 1, 2018, Kazuyuki Corporation purchased an equipment for $90,000. At the time of purchase, the equipment had an estimated useful life of 4 years and an estimated residual value of $10,000. The equipment was bought from a vendor on a remote island, and Kazuyuki had to pay a special sales tax of $20,000 for the purchase. The transportation cost was $50,000. However, the equipment was damaged during transportation and it cost $50,000 to make the necessary repairs to the equipment. Government environmental regulations encouraged modifications to the equipment costing $20,000, which Kazuyuki paid for. All of the transactions were made in cash. On 1 April 2021, Kazuyuki Corporation sold the equipment for $40,000 in cash. 3.1 Make the necessary journal entries to record the transactions related to the purchase of the equipment. 3.2 Make the necessary journal entries to record the transactions related to the sale of the asset assuming Kazuyuki Corporation used the straight-line depreciation method. 3.2 Make the necessary journal entries to record the transactions related to the sale of the asset assuming Kazuyuki Corporation used the double-declining depreciation method. Kazuyuki Corporation has only one customer. Each quarter, the revenue is $60,000 in cash for products delivered. In addition to the machine, each quarter, Kazuyuki Corporation spends $18,000 cash on salaries and $24,000 cash on rent. Corporate tax rates are 20% for each year. 3.3 Prepare the net income before tax expense reported publicly in the financial statements using the straight- line depreciation method for each calendar year 2018 through 2021. 3.4 Prepare the taxable income reported privately to the tax authorities using the double-declining depreciation method for each calendar year 2018 through 2021
