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