The Hunter Company purchased a light truck on January 2, 2010 for $18,000. The truck, which will
Question:
The Hunter Company purchased a light truck on January 2, 2010 for $18,000. The truck, which will be used for deliveries, has the following characteristics:
Estimated life: 5 years
Estimated residual value: $3,000
Depreciation for financial statements: straight-line
Depreciation for income tax purposes: MACRS (three-year-life)
From 2010 through 2014, each year, the company had sales of $100,000, cost of goods sold of $60,000, and operating expenses (excluding depreciation) of $15,000. The truck was disposed of on December 31, 2014 for $2,000.
Required
1. Prepare an income statement for financial reporting through pretax accounting income for each of the five years, 2010 through 2014.
2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the five years, 2010 through 2014.
3. Compare the total income for all five years under Requirement 1 and Requirement 2.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones