Question
Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities
Teri Hatcher Inc., in its first year of operations, has the following differences between the book basis and tax basis of its assets and liabilities at the end of 2013.
Book Basis | Tax Basis | |
Equipment (net) | $404,100 | $332,000 |
Estimated warranty liability | $200,500 | $ 0 |
It is estimated that the warranty liability will be settled in 2014. The difference in equipment (net) will result in taxable amounts of $21,600in 2014, $33,300in 2015, and $17,200in 2016. The company has taxable income of $530,900in 2013. As of the beginning of 2013, the enacted tax rate is35% for 20132015, and30% for 2016. Hatcher expects to report taxable income through 2016.
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