Problem 2: The following information is available for the first four years of operations for Jones Company

   Year           Earnings Before Tax

   2018           $800,000

   2019              730,000

2. On January 2, 2018, heavy equipment costing $600,000 was purchases. The equipment had a life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below

Tax Depreciation

2018       2019           2020           2021           2022 Total

$198,000   270,000       90,000           42,000           0 600,000

3. The company sells its merchandise on an installment contract basis. In 2018, Jones Co. elected, for tax purposes, to report the gross profit from the sales in the year the receivables are collected. However, for financial statement purposes, the company recognized all the gross profit ($800,000) in 2018. these procedures created a $600,000 difference between book and taxable incomes. The future collections of the installment contracts receivables are expected to result in taxable amounts of $200,000 one acc of the next three years.

4. In 2018 Jones Co. recorded $70,000 accrual for litigation liability which will be paid in 2019.

5. The enacted tax rates are 40% for 2018, 34% for the years after

Instructions

Prepare a schedule comparing depreciation for finances reporting and tax purposes for all years

Prepare a reconciliation of Book Income to Taxable Income for 2018

Prepare a schedule of future taxable and (deductible) amounts at the end of 2018

Prepare a schedule of deferred tax (asset) and liability at the end of 2018

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable

On October 1, 2018, the Allegheny Corporation purchased machinery for $314,000. The estimated service life of the machinery is 10 years and the estimated residual value is $6,000. The machine is expected to produce 550,000 units during its life.

Required:
Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

1. Straight line.
2. Sum-of-the-years’-digits.
3. Double-declining balance.
4. One hundred fifty percent declining balance.
5. Units of production (units produced in 2018, 28,000; units produced in 2019, 43,000).

Calculate depreciation for 2018 and 2019 using straight line method. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using sum-of-the-years’ digits. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using double-declining balance. Partial-year depreciation is calculated based on the number of months the asset is in service.

What differentiates experimental from non-experimental designs? Give an illustration of a situation in which an experimental design would be preferred and one in which a non-experimental design would be preferred

Compare and contrast a crafts fair and farmers market to a non-standardized market where consumers do not perceive sellers as all being the same.

Provide an example of a non-standardized market.

Tax Credits

• Briefly explain the difference between a refundable and a non refundable tax credit.
• Then give three examples of tax credits and state if they are non refundable, refundable or partly refundable.