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Calculate the deferred tax effect due to the depreciation

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Reference no: EM132102953

Question - During 2014, P & P Products purchased $20,000 of computer equipment with an estimated life of 5 years and no salvage value. P & P Products uses the straight-line method to depreciate its computer equipment for book purposes and uses MACRS depreciation for tax purposes. This creates a $5,000 difference in depreciation. P & P Products erroneously recorded the computers as equipment expense. P&P Products'92 tax rate is 40%.

Required

a. Make the correcting entry.

b. Calculate the deferred tax effect due to the depreciation of equipment.

Reference no: EM132102953

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