I’m a Lumberjack and I’m OK Co. (Lumberjack) has the following temporary tax differences: Lumberjack collected...

I’m a Lumberjack and I’m OK Co. (Lumberjack) has the following temporary tax differences:

Lumberjack collected rents of $100,000 total for 4 years at the beginning of 2019. For tax purposes, rent revenue is recognized when collected. For financial reporting purposes, the lease is classified as an operating lease and rent revenue is recognized on a straight-line basis over the lease term.

Lumberjack has equipment that cost $1,120,000 with an estimated useful life of 7 years. At the end of 2019, the accounting carrying value for the equipment was $480,000 and the tax basis was $349,888. During 2020, the MACRS rate for tax purposes is 8.93%; straight-line depreciation is used for financial reporting purposes.

Lumberjack has a defined benefit pension plan for its employees. The accrual basis is used for financial reporting purposes, whereas for tax purposes, deductions are allowed as the plan is funded. As of the end of 2019, pension expense for financial reporting has been $500,000 greater than tax deductions allowed for funding contributions. For 2020, the pension expense recorded for financial reporting purposes was $70,000 and the amount deducted for tax purposes was $30,000.

REQUIRED: Complete the following schedules for each temporary difference to compute current year and future taxable (deductible) amounts for 2020.

	Rent Revenue		Taxable (Deductible)
Year	Book	Tax	Current	Future
2019
2020

	Depreciation Expense		Taxable (Deductible)
Year	Book	Tax	Current	Future
End of 2019
2020

	Pension Expense		Taxable (Deductible)
Year	Book	Tax	Current	Future
End of 2019
2020

Expert Solution

Rent Revenue		Taxable (Deductible)
Year	Book	Tax	Current	Future
2019-2020	25000	100000	75000	-75000

Depreciation Expense
		Taxable (Deductible)
Year	Book	Tax	Current	Future
End of 2019 2020	160000	31245	128755	1357

Pension Expense
		Taxable (Deductible)
Year	Book	Tax	Current	Future
End of 2019 2020	70000	30000	40000	-540000

ekkarill92 answered 2 years ago

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