Question
Scroll down to complete all parts of this task. The following information pertains to Tempo Co., a manufacturer of household appliances, for the year ended
Scroll down to complete all parts of this task.
The following information pertains to Tempo Co., a manufacturer of household appliances, for the year ended December 31, Year 5. The noncurrent liabilities section of Tempo Co.'s December 31, Year 4, balance sheet included a deferred income tax liability of $15,750.
The only difference between Tempo's taxable income and pretax accounting income is depreciation on a machine acquired on January 1, Year 4, for $250,000. The machine's estimated useful life is 5 years, with no salvage value. Depreciation is computed using the straight-line method for financial reporting purposes and the MACRS method for tax purposes. Depreciation expense for tax and financial reporting purposes for Year 5 through Year 8 is presented in the following table.
| Year | Tax Depreciation | Financial Depreciation | Tax Depreciation over (under) Financial Depreciation | |||
| Year 5 | $80,000 | $50,000 | $30,000 | |||
| Year 6 | 40,000 | 50,000 | (10,000) | |||
| Year 7 | 35,000 | 50,000 | (15,000) | |||
| Year 8 | 30,000 | 50,000 | (20,000) |
The enacted federal income tax rates are 30% for Year 4 and Year 5, and 35% for Year 6 through Year 8.
Included in Tempo's December Year 4 balance sheet was a deferred tax asset of $9,000.
For the year ended December 31, Year 5, Tempo's income before income taxes was $430,000.
Complete Tempo's balance sheet by calculating Tempo's income before income taxes, current income tax expense, deferred income tax expense, and net income using the information above. Enter the appropriate amounts in the designated cells below. Enter all amounts as positive values. Enter any percentages as decimals.
Tempo Co. INCOME TAX EXPENSE AND NET INCOME For the Year Ended December 31, Year 5
| Income before income taxes | ? | |
| Income tax expense: | ||
| Current | ? | |
| Deferred | ? | ? |
| Net income | ? | |
| Computation: Deferred income tax expense | ||
| Temporary difference | ||
| Year 6 | ? | |
| Year 7 | ? | |
| Year 8 | ? | ? |
| Effective tax rate for years Year 6 through Year 8 | ? | |
| Deferred tax liability, 12/31/Year 5 | ? | |
| 12/31/Year 4 deferred tax asset | ? | |
| 12/31/Year 4 deferred tax liability | ? | ? |
| Year 5 deferred income tax expense | ? |
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