Exam2-Acct414-F06 02 Exam2-Acct414-F06 01 Exam2-Acct414-F06

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Problem 4 (work paper on next page)

                                                         Depreciation

                                                         for Financial                     Depreciation for                  Temporary

                Year                              Reporting Purposes             Tax Purposes                     Difference

                2006                                     $120,000                           $198,000                           $ (78,000)

                2007                                        120,000                             270,000                            (150,000)

                2008                                        120,000                               90,000                               30,000

                2009                                        120,000                               42,000                               78,000

                2010                                        120,000                             -0-                                       120,000

                                                               $600,000                           $600,000                        $     -0-       

Dec 31, 2006
            Income Tax Expense...................................................................................... 200,000

                            Net Deferred Taxes.......................................................................................            31,200

                            Income Tax Payable ($422,000 × 40%)....................................................          168,800

 

Dec 31, 2007
            Income Tax Expense...................................................................................... 120,600

                            Net Deferred Taxes............................................................................. 7,400

                            Income Tax Payable ($320,000 × 40%)....................................................          128,000

 

Dec 31, 2008 (not required)
            Income Tax Expense...................................................................................... 133,000

                            Net Deferred Taxes.......................................................................................            17,500

                            Income Tax Payable ($330,000 × 40%)....................................................          115,500

 

Problem 4

 

Note for 2007, the 160,000 prepaid is half current and half noncurrent – for determining balance sheet amounts.

 

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