Question
suppose a company buys a building for $1 million and uses straight-line depreciation for financial reporting purposes but accelerated depreciation for tax purposes. In the
suppose a company buys a building for $1 million and uses straight-line depreciation for financial reporting purposes but accelerated depreciation for tax purposes. In the first year, the company would record $100,000 in depreciation expense for financial reporting purposes but $200,000 for tax purposes, resulting in a temporary difference of $100,000. The company would record a deferred tax liability of $35,000 (assuming a tax rate of 35%) to account for the tax that will be due when the temporary difference reverses.
suppose a company sets aside a reserve of $50,000 for bad debts. The company would record an expense of $50,000 for financial reporting purposes, but the reserve would not be deductible for tax purposes until a bad debt actually occurs. As a result, the company would record a deferred tax liability to account for the tax that will be due when the reserve is eventually deducted for tax purposes.
Make these two examples into a journal entry please.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started