A company purchased a new pizza oven directly from Italy for $ 12675. It will work for 5 years and has no salvage value. The tax rate is 41 percent, and annual revenues are constant at $ 7192. For financial reporting, the straight-line depreciation method is used, but for tax purposes depreciation is accelerated to 35 percent in years 1 and 2, and 30 percent in year 3. For purposes of this exercise ignore all expenses other than depreciation. Assume the tax rate for years 4 and 5 changed from 41 percent to 31 percent. What will be the deferred tax liability as of the end of year 3 and the resulting adjustment to net income in year 3 for financial reporting purposes due to the change in the tax rateDeferred Tax Liability Net Income ①A. $1572 $ 507 ②B. $1572$ 747 ③C. $1039$ 5O7
A．
| A. ① |
B．
| B. ② |
C．
| C. ③ |
参考答案：A
解析：Straight-line depreciation is $12675/5 = $ 2535. Financial statement income is $7192 - $ 2535 = $ 4657. Accelerated depreciation is $12675 (0.35) = $ 4436 in years 1 and 2 and $ 12675(0.3) = $3803 in year 3. Taxable income is $7192 - $4436 = $2756 in years 1 and2 and $7192- $3803= $3389 in year 3. At the old tax rate of 41% : Deferred Tax liability for year 1 = $ 779.41 [ ( $ 4657 - $ 2756 ) × 0.41 ] Deferred Tax liability for year 2 = $779.41 [ ( $4657 - $2756) ×0.41] Deferred Tax liability for year 3 = $519.88 [ ( $4657- $ 3389) ×0.41 ] Deferred tax liability at the end of year 3, before the change in tax rate, is $2079 = ( $779.41 + $779.41 + $519.88) At the new tax rate of 31% : Deferred Tax liability for year 1 = $ 589. 31 [( $ 4657 - $ 2756) ×0.31] Deferred Tax liability for year 2 = $ 589.31 [ ( $ 4657 - $ 2756 ) × 0.31 ] Deferred Tax liability for year 3 = $ 393.08 [ ( $4657 - $ 3389) ×0.31 ] Deferred tax liability at the end of year 3, after the change in tax rate, will be $1572 = ( $589.31+ $589.31+ $393.08) The deferred tax liability will decrease by $ 507 = ( $ 2079 - $1572) due to the new lower tax rate. An adjustment of $ 507 in tax expense will result in increase in net income by the same amount $ 507.