Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows: 2015 ............$210,000 2016 ............. 240,000
Question:
Wyhowski Inc. reported income from operations, before taxes, for 2015-2017 as follows:
2015 ............$210,000
2016 ............. 240,000
2017 ............. 280,000
When calculating income, Wyhowski deducted depreciation on plant equipment. The equipment was purchased January 1, 2015, at a cost of $88,000. The equipment is expected to last three years and have an $8,000 salvage value. Wyhowski uses straight-line depreciation for book purposes.
For tax purposes, depreciation on the equipment is $50,000 in 2015, $20,000 in 2016, and $10,000 in 2017. Wyhowski's tax rate is 35%.
Required
1. How much did Wyhowski pay in income tax each year?
2. How much income tax expense did Wyhowski record each year?
3. What is the balance in the Deferred Income Tax account at the end of 2015, 2016, and 2017?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1337491471
10th edition
Authors: Gary A. Porter, Curtis L. Norton