Question
Transportation owns a fleet of 55 semi-trucks. The original cost of the fleet was $6,050,000. Orland usesstraight-line depreciation for the fleet for accountingpurposes, and MACRS
Transportation owns a fleet of 55 semi-trucks. The original cost of the fleet was $6,050,000. Orland usesstraight-line depreciation for the fleet for accountingpurposes, and MACRS depreciation for tax purposes. The company had a deferred tax liability balance of $170,000 at the end of fiscal year 2017 related to the fleet.
At the end of fiscal year 2018, the GAAP book value of the fleet was $5,170,000, while the tax book value was $4,540,000. Orland's taxable income for fiscal year 2018 was $6,100,000. Its tax rate was 30%.
1.Calculate the deferred tax liability related to the fleet as of the end of fiscal year 2018.
2.Record the tax accrual for 2018 as of the end of fiscal year 2018.
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