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Reddick Inc. purchased machinery on 1/1/2018 for $220,000. Assuming no salvage value, JV depreciated the asset straight line over a 4-year life for Book purposes,
Reddick Inc. purchased machinery on 1/1/2018 for $220,000. Assuming no salvage value, JV depreciated the asset straight line over a 4-year life for Book purposes, and 3-year life for Tax purposes. Assume a zero residual for both book and tax.
Required: (a) What would be the balance in the Deferred Tax Liability account at the end of each year, assuming a 30% tax rate? (b) What would be the journal entry if Reddick sold the asset for $30,000 at the beginning of year 5 be sure to consider the effect on taxes?
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