2. Use the information from Problem 11 5 a. Determine the...
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Accounting
2. Use the information from Problem 11 5
a. Determine the balance of the Deferred Tax Asset or Liability account at the end of each year
b. Prepare the journal entry to record the tax provision for year 2 & year 5.
c. If a new income tax rate of 35% is enacted into law at the end of year 4, what would be the revised value of the deferred tax asset or liability?
Year P5. Temporary Differences, Deferred Tax Liabilities, Change in Tax Rates. Kimm-Mills Incorporated (KMI) acquired a piece of equipment at a total cost of $5,400,000. KMI uses the straight-line method of depreciation for financial reporting purposes and an accelerated r.ethod for tax purposes. The asset has a 6-year life for book purposes and for tax purposes. There is to estimated scrap value. KMI is subject to a 40% tax rate. We present the incorre and depreciation surr.ary for both tax ard GAAP. Income before Tax Tax and Depreciation Depreciation GAAP Depreciation $1,200,000 $1,080,000 $ 900,000 1,880,000 1,728,000 900,000 1,980,000 1,036,800 900,000 2,100,000 622,080 900,000 1,750,000 622,080 900,000 1,200,500 311,040 900,000 Totals $5,400,000 $5,400,000 1 2 3 4 5 6
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