Question

In: Accounting

On January 1, 2013, Ameen Company purchased a building for $42 million. Ameen uses straight-line depreciation...

On January 1, 2013, Ameen Company purchased a building for $42 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2017, the book value of the building was $36 million and its tax basis was $26 million. At December 31, 2018, the book value of the building was $34 million and its tax basis was $19 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2018 was $50 million.

Required:
1. Prepare the appropriate journal entry to record Ameen’s 2018 income taxes. Assume an income tax rate of 40%.
2. What is Ameen’s 2018 net income?

Solutions

Expert Solution


Related Solutions

Bonita Company purchased a computer for $8,720 on January 1, 2019. Straight-line depreciation is used, based...
Bonita Company purchased a computer for $8,720 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,090 salvage value. In 2021, the estimates are revised. Bonita now feels the computer will be used until December 31, 2022, when it can be sold for $545. Compute the 2021 depreciation. (Round answer to 0 decimal places, e.g. 45,892.) Depreciation expense, 2021
North Ltd. purchased a building in 2015 for $1,390,000. Straight-line depreciation was used, with a useful...
North Ltd. purchased a building in 2015 for $1,390,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $400,000. A full year of depreciation was charged in 2015. In 2018, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 25%. Required: 1. Assume this is a change in estimate, and calculate 2018 depreciation expense. Depreciation expense 2 Assume this is a change in...
Headland Corp. purchased machinery on January 1, 2016 for $462,000. Straight-line depreciation is used. At the...
Headland Corp. purchased machinery on January 1, 2016 for $462,000. Straight-line depreciation is used. At the time management estimated that the machinery would be used over 10 years and would have a residual value of $41,000. It is now December 31, 2020 and management has determined that the machine’s life is now a total of 12 years with no residual value. No adjusting journal entries have been recorded yet for the 2020 year-end. What journal entries are required to record...
Meca Concrete purchased a mixer on January 1, 2016, at a cost of $39,600. Straight-line depreciation...
Meca Concrete purchased a mixer on January 1, 2016, at a cost of $39,600. Straight-line depreciation for 2016 and 2017 was based on an estimated eight-year life and $2,400 estimated residual value. In 2018, Meca revised its estimate and now believes the mixer will have a total service life of only six years, and that the residual value will be only $1,400. Compute annual depreciation for 2018 and 2019. Annual depreciation for 2018 and 2019-
A company purchased a building at the beginning of the year for $200,000 and is using straight-line depreciation to depreciate it over 20 years.
  A company purchased a building at the beginning of the year for $200,000 and is using straight-line depreciation to depreciate it over 20 years. The salvage value of the building is $50,000. Prepare the adjusting entry to record the depreciation expense for the current year. DEBIT: Accumulated Depreciation for $5,000; CREDIT: Depreciation Expense for $5,000 DEBIT: Accumulated Depreciation for $7,500; CREDIT: Depreciation Expense for $7,500 DEBIT: Depreciation Expense for $5,000; CREDIT: Accumulated Depreciation for $5,000 DEBIT: Depreciation Expense for...
Brief Exercise 11-7 Novak Company purchased a computer for $8,880 on January 1, 2016. Straight-line depreciation...
Brief Exercise 11-7 Novak Company purchased a computer for $8,880 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,110 salvage value. In 2018, the estimates are revised. Novak now feels the computer will be used until December 31, 2019, when it can be sold for $555. Compute the 2018 depreciation. (Round answer to 0 decimal places, e.g. 45,892.)
Eckland Manufacturing Co. purchased equipment on January 1, 2016, at a cost of $90,900. Straight-line depreciation...
Eckland Manufacturing Co. purchased equipment on January 1, 2016, at a cost of $90,900. Straight-line depreciation for 2016 and 2017 was based on an estimated eight-year life and $2,100 estimated residual value. In 2018, Eckland revised its estimate and now believes the equipment will have a total service life of only six years, while the residual value remains the same. Required: Compute depreciation for 2018 and 2019.
Straight Line Depreciation - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000; salvage value is...
Straight Line Depreciation - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000; salvage value is $2,000. Useful life is 5 years. Remember: the asset cannot depreciate below its salvage value. A. How is the depreciable cost for the straight-line method computed? B. What is the depreciable cost amount? C. Show your coputation to calculate the annual depreciation expense. D. Complete the following Straight Line Depreciation table: Year Opening Value Depreciation Expense Net Book Value E. What pattern is clear...
Nokia purchases equipment for $1,000,000 on January 1, 2014. Nokia uses the straight-line method for depreciation....
Nokia purchases equipment for $1,000,000 on January 1, 2014. Nokia uses the straight-line method for depreciation. Nokia chooses to revaluate its equipment every December 31. Please answer the following questions. (1) On January 1, 2014, the equipment has a useful life of 5 years and its residual value is zero. The fair value of equipment on December 31, 2014 is $950,000. Prepare the necessary journal entries on December 31, 2014. ● (2) On January 1, 2015, the equipment has a...
The Typhoon Company uses straight-line depreciation. It lowers an estimated salvage value, resulting in a depreciation...
The Typhoon Company uses straight-line depreciation. It lowers an estimated salvage value, resulting in a depreciation expense higher than previous year amounts. In addition to the recording of depreciation for the current year a) A restatement of financial statements and a credit to Accumulated Depreciation b) A restatement of financial statements and a debit to Accumulated Depreciation c) No restatement of financial statements and a credit to Accumulated Depreciation d) No restatement of financial statements and a debit to Accumulated...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT