Swingley Company used an accelerated method to depreciate its fixed assets for tax purposes and the straight-lime
Question:
Swingley Company used an accelerated method to depreciate its fixed assets for tax purposes and the straight-lime method for financial reporting purposes. In 2011, the accelerated method recognized depreciation of $35,000, while the straight-line method recognized depreciation of $20,000. Taxable income and net income before taxes for that year were $65,000 and $80,000, respectively.
a. If the federal income tax rate is 35 percent, prepare the journal entry recorded by Swingley to accrue its 2011 tax liability.
b. If the federal income tax rate is 30 percent, prepare the journal entry recorded by Swingley to accrue its 2011 tax liability.
c. Briefly explain why the deferred income tax account is considered a liability on the balance sheet and why it is less when the tax rate is 30 percent rather than 35 percent.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Income Tax Expense E SE 28000 a Income Tax Liability L 22750 b Deferred Income Taxes L 5250 Incurr...View the full answer
