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Determine the tax basis of equipment on december

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Question - Alexa Inc. purchased equipment in 2018 for $40,000 with no residual value. On December 31, 2020, accumulated depreciation using the straight-line method for financial reporting was $12,000. For tax purposes, Alexa uses MACRS depreciation resulting in $28,480 in accumulated depreciation for tax purposes on December 31, 2020. Taxable income was $80,000 for 2020 and the company's tax rate is 25%.

a. Determine the GAAP basis of equipment (net) on December 30, 2020.

b. Determine the tax basis of equipment on December 30, 2020.

c. Assuming a deferred tax liability balance of $3,920 on December 31, 2019, record income tax expense for 2020.

Reference no: EM133175738

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