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Computation Part2

The document contains financial information for multiple years regarding carrying amounts, tax bases, and temporary differences for computer software costs, buildings, and accrued liabilities. It also includes calculations for current tax expense, deferred tax liabilities and assets, and net income. Revaluation of equipment is presented with calculations of revaluation surplus and related deferred tax liability.

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Jeane Mae Boo
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35 views4 pages

Computation Part2

The document contains financial information for multiple years regarding carrying amounts, tax bases, and temporary differences for computer software costs, buildings, and accrued liabilities. It also includes calculations for current tax expense, deferred tax liabilities and assets, and net income. Revaluation of equipment is presented with calculations of revaluation surplus and related deferred tax liability.

Uploaded by

Jeane Mae Boo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Carrying Amount Tax Base Difference

Computer Software Cost 4,000,000 0 4,000,000


Building 47,500,000 45,000,000 2,500,000

Carrying Amount Tax Base Difference


Computer Software Cost 3,000,000 0 3,000,000
Building 45,000,000 40,000,000 5,000,000
Accrued Liability-Health Care 2,000,000 0 2,000,000

Carrying Amount Tax Base Difference


Computer Software Cost 3,000,000 0 3,000,000
Building 45,000,000 40,000,000 5,000,000
Accrued Liability-Health Care 2,000,000 0 2,000,000

Carrying Amount Tax Base Difference


Computer Software Cost 4,000,000 0 4,000,000
Building 47,500,000 45,000,000 2,500,000

Computer Software Cost 5,000,000 Computer Software Cost 5,000,000


Amortization for 2021 (5,000,000/5) (1,000,000) Amortization for 2021 (5,000,000/5) (1,000,000)
Carrying Amount-Dec. 31, 2021 4,000,000 Carrying Amount-Dec. 31, 2021 4,000,000

Building 50,000,000 Building 50,000,000


Accum. Depreciation (50m x 5%) (2,500,000) Accum. Depreciation (50m x 5%) (2,500,000)
Carrying Amount- December 31, 2021 47,500,000 Carrying Amount- December 31, 2021 47,500,000

Building 50,000,000 Building 50,000,000


Accum. Depreciation (50m x 10%) (5,000,000) Accum. Depreciation (50m x 10%) (5,000,000)
Tax Base - December 31, 2021 45,000,000 Tax Base - December 31, 2021 45,000,000

Computer Software Cost 4,000,000 Computer Software Cost 4,000,000


Building (47,500,000-45,000,000) 2,500,000 Building (47,500,000-45,000,000) 2,500,000
Total Taxable Temporary Difference 6,500,000 Total Taxable Temporary Difference 6,500,000

Taxable Temporary Difference 6,500,000 Taxable Temporary Difference 6,500,000


Multiply by tax rate 30% Multiply by tax rate 30%
Deferred Tax Liability- Dec. 31, 2021 1,950,000 Deferred Tax Liability- Dec. 31, 2021 1,950,000

Pretax Accounting Income 10,000,000 Pretax Accounting Income 10,000,000


Computer Software Cost in 2021 (4,000,000)Computer Software Cost in 2021 (4,000,000)
Excess Tax Depreciation (5,000,000-2,500,000) (2,500,000)Excess Tax Depreciation (5,000,000-2,500,000) (2,500,000)
Taxable Income 3,500,000 Taxable Income 3,500,000
Multiply by Tax Rate 30% Multiply by Tax Rate 30%
Current Tax Expense 1,050,000
Current Tax Expense 1,050,000Income before tax 10,000,000
Income tax expense:
Income before tax 10,000,000 Current tax expense 1,050,000
Income tax expense: Deferred tax expense 1,950,000 (3,000,000)
Current tax expense 1,050,000 Net Income 7,000,000
Deferred tax expense 1,950,000 (3,000,000)
Net Income 7,000,000

Computer Software Cost 3,000,000 Computer Software Cost 3,000,000


Building 5,000,000 Building 5,000,000
Total Taxable Temporary Differences 8,000,000 Total Taxable Temporary Differences 8,000,000
Multiply by: Tax Rate 30% Multiply by: Tax Rate 30%
Deferred Tax Liability for Dec. 31,2022 2,400,000 Deferred Tax Liability for Dec. 31,2022 2,400,000
Less: Deferred Tax Liab. For 2021 1,950,000 Less: Deferred Tax Liab. For 2021 1,950,000
Increase in Deferred Tax Liability 450,000 Increase in Deferred Tax Liability 450,000

Accrued Liability 2,000,000 Accrued Liability 2,000,000


Multiply by: Tax Rate 30% Multiply by: Tax Rate 30%
Deferred Tax Asset- Dec. 31, 2022 600,000 Deferred Tax Asset- Dec. 31, 2022 600,000

Pretax Accounting Income 15,000,000


Reversal of amortization of software cost 1,000,000
Excess Tax Depreciation (5,000,000-2,500,000) (2,500,000)
Health Care benefits not yet deductible for tax purposes 2,000,000
Taxable Income 15,500,000
Multiply by Tax Rate 30%
Current Tax Expense 4,650,000

Income before tax Income before tax


15,000,000 15,000,000
Income tax expense: Income tax expense:
Current tax expense 4,650,000 Current tax expense 4,650,000
Deferred tax expense 450,000 Deferred tax expense 450,000
Income tax benefit (600,000) (4,500,000) Income tax benefit (600,000) (4,500,000)
Net Income Net Income
10,500,000 10,500,000
Pretax Accounting Income 15,000,000
Reversal of amortization of software cost 1,000,000
Excess Tax Depreciation (5,000,000-2,500,000) (2,500,000)
Health Care benefits not yet deductible for tax purposes 2,000,000
Taxable Income 15,500,000
Multiply by Tax Rate 30%
Current Tax Expense 4,650,000
Cost Replacement Cost Appreciation
Equipment 6,000,000 6,750,000 750,000
Accumulated Depreciation
(6,000,000/15x5) 2,000,000
(6,750,000/15x5) 2,250,000 250,000
Carrying Amount/Sound 4,000,000 4,500,000 500,000
Value/Revaluation Surplus

Cost Replacement Cost Appreciation


Equipment 6,000,000 6,750,000 750,000
Accumulated Depreciation
(6,000,000/15x5) 2,000,000
(6,750,000/15x5) 2,250,000 250,000
Carrying Amount/Sound 4,000,000 4,500,000 500,000
Value/Revaluation Surplus

Revaluation Surplus 500,000


Multiply by: Tax rate 30%
Revaluation Surplus 500,000
Deferred tax liability-RS 150,000 Multiply by: Tax rate 30%
Deferred tax liability-RS 150,000
Carrying amount of Replacement Cost 4,500,000 Carrying amount of Replacement Cost 4,500,000
Divided by: Remaining Useful Life 10
Divided by: Remaining Useful Life 10
Annual Depreciation 450,000
Annual Depreciation 450,000

Revaluation Surplus 500,000 Revaluation Surplus 500,000


Less: Deferred Tax Liability 150,000 Less: Deferred Tax Liability 150,000
Net Revaluation Surplus 350,000 Net Revaluation Surplus 350,000
Divided by: Remaining Useful Life 10 Divided by: Remaining Useful Life 10
Annual Realization 35,000 Annual Realization 35,000

Income before depreciation and tax 3,000,000 Income before depreciation and tax 3,000,000
Less: Tax Depreciation Based on Cost Less: Tax Depreciation Based on Cost
(4,000,000/10) (400,000) (4,000,000/10) (400,000)
Taxable income 2,600,000 Taxable income 2,600,000
Multiply by: Tax Rate 30% Multiply by: Tax Rate 30%
Current Tax Expense 780,000 Current Tax Expense 780,000

Equipment at Replacement Cost 6,750,000


Accumulated Depreciation:
January 1, 2021 2,250,000
Depreciation on Revalued Amount for 2021 450,000 2,700,000
Carrying Amount- December 31,2021 4,050,000

Equipment at Cost 6,000,000


Accumulated Depreciation:
January 1, 2021 2,000,000
Depreciation on Cost for 2021 400,000 2,400,000
Tax Base-December 31,2021 3,600,000

Equipment at Replacement Cost 6,750,000


Accumulated Depreciation:
January 1, 2021 2,250,000
Depreciation on Revalued Amount for 2021 450,000 2,700,000
Carrying Amount- December 31,2021 4,050,000

Equipment at Cost 6,000,000


Accumulated Depreciation:
January 1, 2021 2,000,000
Depreciation on Cost for 2021 400,000 2,400,000
Tax Base-December 31,2021 3,600,000

Carrying Amount 4,050,000 Carrying Amount 4,050,000


Tax Base 3,600,000 Tax Base 3,600,000
Taxable Temporary Difference 450,000 Taxable Temporary Difference 450,000
Multiply by: Tax Rate 30% Multiply by: Tax Rate 30%
Deferred Tax Liability-12/31/2021 135,000 Deferred Tax Liability-12/31/2021 135,000
Less: Deferred Tax Liability-01/01/2021 150,000 Less: Deferred Tax Liability-01/01/2021 150,000
Decrease in Deferred Tax Liability (15,000) Decrease in Deferred Tax Liability (15,000)

Income before depreciation and tax 3,000,000


Depreciation on revalued amount (450,000)
Income before tax 2,550,000
Income tax expense:
Current tax expense 780,000
Decrease in Deferred tax liability (15,000) 765,000
Net Income 1,785,000
Revaluation Surplus Realization 35,000
Total Effect on Retained Earnings 1,820,000

Income before depreciation and tax 3,000,000


Depreciation on revalued amount (450,000)
Income before tax 2,550,000
Income tax expense:
Current tax expense 780,000
Decrease in Deferred tax liability (15,000) 765,000
Net Income 1,785,000
Revaluation Surplus Realization 35,000
Total Effect on Retained Earnings 1,820,000

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