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I just cut out some part from a deferred tax simulation.
The company uses straight‐line depreciation for financial reporting (GAAP) purposes and accelerated
methods for income tax purposes. Balances and activity in the accumulated depreciation account for GAAP. Effective tax rate is 33%
and income tax purposes are summarized below:
GAAP Tax Difference
Accumulated depreciation, December 31, year 1 1,314,000 2,018,000 704,000
Year 2 depreciation expense 196,000 259,000 63,000
Accumulated depreciation, December 31, year 2 1,510,000 2,277,000 767,000and the answer for this question was this:
Accumulated depreciation, excess of tax over GAAP: Temp.Diff=767,000, DTL=253,110 (767Kx33%)I really don’t understand why the whole ACCUMULATED depreciation (not depre exp of that year) is temporary difference. I thought only the year’s depreciation expense in excess of book, $63,000 is to be used for temporary difference to get to DTL. I’m so confused. Need help here!
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