Problem - McMohan Corporation had the following balance sheet accounts at the end of year 1 and year 2:
| |
Year 1 |
Year 2
|
|
|
Book
|
Tax
|
Book
|
Tax
|
|
Bad Debt reserve
|
65,000
|
0
|
50,000
|
0
|
|
Inventory
|
600,000
|
625,000
|
750,000
|
800,000
|
|
Accumulated Depreciation
|
200,000
|
400,000
|
300,000
|
450,000
|
Assuming McMohan's book income (after adjusting for permanent differences) is $100,000.
1) What is McMohan's book tax expense for Year 2?
2) Calculate McMohan's deferred tax assets and liabilities at the end of Year 2
3) What is the Journal entry McMohan will make to properly record its year 2 tax provision (i.e., current tax expense, taxes payable, and any changes to its deferred tax assets and/or liabilities)?
Assume a 34% tax rate for all your computation.