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12345 [234]
3 years ago
8

"Ayres Services acquired an asset for $80 million in 2021. The asset is depreciated for financial reporting purposes over four y

ears on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income $ 330 $ 350 $ 365 $ 400 Depreciation on the income statement 20 20 20 20 Depreciation on the tax return (25 ) (33 ) (15 ) (7 ) Taxable income $ 325 $ 337 $ 370 $ 413 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)"
Business
1 answer:
Zepler [3.9K]3 years ago
8 0

a. The cumulative temporary book-tax difference for the depreciable asset are as follows:

December 31, 2021 = $60 million

December 31, 2022 = $40 million

December 31, 2023 = $20 million

December 31, 2024 = $0

b. The balance to be reported in the deferred tax liability account are as follows.

December 31, 2021 = $15 million

December 31, 2022 = $10 million

December 31, 2023 = $5 million

December 31, 2024 = $0

Explanation:

Note: See the attached excel file for the calculation of cumulative temporary book-tax difference for the depreciable asset and the balance to be reported in the deferred tax liability account for December 31 of years 2021, 2022, 2023 and 2024 in bold red color.

In the attached excel file, the following formula are used:

Cumulative Temporary differences at December 31 of the current year = Cumulative Temporary differences at December 31 of the previous year + (Depreciation on the tax return at December 31 of the current year - Depreciation on the income statement at December 31 of the current year)

Balance to be reported in deferred tax liability account at December 31 of the current year = Cumulative Temporary differences at December 31 of the current year * Tax rate

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suppose that lenders want to receive a real rate of interest of 5%, and that they expect inflation to remain steady at 3% in the
HACTEHA [7]

The interest rate is 7%.

<u>Solution:</u>

The real rate of interest is always above the nominal interest rate when inflation is positive. In this case, we are told inflation is 3%. Since the real rate of return is the nominal interest rate minus inflation, we need a nominal interest rate of <u>5%+3%=8%</u> to get a real interest rate of 5%.

To calculate the real interest rate subtract the inflation rate from the nominal interest rate. Mathematically it looks like this The real interest rate is the nominal interest rate minus the inflation rate. Creeping inflation is a type of inflation in which the price level rises steadily at a moderate rate over an extended period of time.

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7 0
1 year ago
Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made fro
il63 [147K]

<u>Answer:</u>

<u>Determine the plantwide overhead rate for Laval using direct labor hours as a base. </u>  

1. Estimated overhead costs  $800,000  $1.60  per direct labor hour

Estimated direct labor hours  500,000  

2. <u>Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate. </u>

Direct Labor - Assembly  $188,500

Direct Labor - Fabricating  395,200

Direct materials  270,000

Overhead  34,720

Total manufacturing costs  888,420

Units produced  22000

Manufacturing cost per unit  40.38

3.  <u>Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department. </u>

                    Departmental overhead rate  

Fabricating  390000/152000 = 2.57  MH

Assembly  410000/290000 = 1.41  DLH  

4.  <u>Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.   </u>  

Direct materials                                                         270000  

Direct labor    

Fabricating                                   188500  

Assembly                                   395200  

                                                                                 583700

                                                                                       0

Overhead    

Fabricating (15000*2.57)               38550  

Assembly (15200*1.41)                        21432  

                                                                                       59982

                                                                                            0

Total manufacturing cost                                                  913682

Units produced                                                                    22000

Manufacturing cost per unit                                                41.53  per unit

8 0
3 years ago
What is the effect of an accrued expense (such as salaries expense) adjustment on the income statement and the balance sheet? (c
vredina [299]

A liability (such as salaries payable) will be increased. Expenses are increased. Net income is reduced.

<h3>What is liability?</h3>

What a person or business owes is known as a liability, and the amount owed is typically monetary. The transmission of economic rewards, such as money, products, or services, settles liabilities over time. Having to pay anything to someone else under the law is known as having a liability. To pay for a business's continuous operations, liabilities are incurred. Accounts payable, accumulated costs, owed wages, and owed taxes are a few examples of liabilities.

What your business has that has the potential to generate future financial benefits are its assets.

What you owe other people is your liability. To put it simply, assets increase your financial security while liabilities decrease it.

Obligations aren't always a terrible thing. Some loans are taken out to buy new equipment, such as machinery or automobiles, which aids small businesses in running and expanding.

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7 0
1 year ago
Enrique is giving a presentation to convince his managers that offering yoga classes at work will improve productivity because i
Ilya [14]

Answer:

a) He will ask the audience to stand and do a simple yoga pose.

Explanation:

Base on the scenario been described in the question, we saw the Enrique is given a presentation to convince his managers that offering yoga classes at work will improve productivity because it will help employees clear their minds. The aspects of his presentation that shows he wants to include kinesthetic learners is , he asked the audience to stand up and do a simple yoga pose.

Kinesthetic learning is a learning style in which learning which involves the students doing physical activities, rather than watching demonstrations or listening to lectures.

3 0
3 years ago
Read 2 more answers
Nelson Ovalles worked as a cable installer for Cox Rhode Island Telecom, LLC, under an agreement with a third party, M&amp;M Com
Illusion [34]

Answer:

No.

Explanation:

Ovalles was an M&M contractor to perform work assigned by M&M. As the question says, <em>"Cox had minimal contact with him and limited power to control the manner in which he performed his duties."</em>.  That is the main feature of a contractor, different from an employee who works directly for Cox. The liability is completely of M&M.

5 0
2 years ago
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