Reference no: EM132566642
Question - Carolina Corp. purchased equipment for $180,000 on January 2, 2016, its first day of operations. For book purposes, the equipment will be depreciated straight-line over three years with no residual value. Pre-tax accounting incomes and taxable incomes are as follows:
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2016
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2017
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2018
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Pre-tax accounting income
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$124,000
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$140,000
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$150,000
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|
Taxable income
|
100,000
|
140,000
|
174,000
|
The reversible difference between pre-tax accounting income and taxable income is due solely to the use of CCA for tax purposes.
Required -
a. Prepare the adjusting journal entries to record income taxes for all three years (expense, deferred tax assets/liabilities, etc.), assuming that the enacted income tax rate for all three years is 30%.
b. Prepare the adjusting journal entries to record income taxes for all three years (expense, deferred tax assets/liabilities, etc.), if the enacted income tax rate for 2016 is 30% but that in the middle of 2017, Parliament raises the income tax rate to 35%, retroactive to the beginning of 2017.