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    Calculation of Depreciation and the use of Journal Entries

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    9. Listed below is information for the Higher Corporation:

    2006 2007
    Pretax Accounting Income $160,000 $220,000
    Pretax Taxable Income 180,000 200,000

    Assume that Higher's tax liability is based on a flat 40% rate.

    Required:

    a. Prepare the journal entry to record Higher's income tax expense for 2006.
    b. Prepare the journal entry to record Higher's income tax expense for 2007.

    10. McNally Company recently acquired a building from Perry Company in exchange for 5,000 shares of its capital stock and $15,000. Information relating to the sale is detailed below:

    Perry's net book value of building $62,000
    Professional appraisal value of building 64,000
    Market value of McNally Company Stock $9.00/share

    Required:

    Record the purchase of the building on the books of the McNally Company.

    11. Yin Company recently purchased land and a building for $210,000. The building was appraised at $120,000 and the land was appraised at $60,000.

    Required:

    Show Yin's balance sheet presentation of the land and building.

    12. A machine costing $48,000 had an estimated useful life of 5 years and a salvage value of $3,000 when purchased on January 3, Year 1.

    Required: Supply the missing information in the table below:

    Depreciation Accumulated Book
    Expense for Depreciation Value
    Method Year 2 on 12/31/Yr 2 on 12/31/Yr 2

    Straight-Line ____________ ____________ ____________

    Double Declining
    Balance ____________ ____________ ____________

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    Solution Preview

    Please find attached a formatted MS Excel spreadsheet containing the text below as well as helpful notes, which will help in gaining an understanding of the subject matter.

    9 Listed below is information for the Higher Corporation:

    2006 2007
    Pretax Accounting Income $160,000 $220,000
    Pretax Taxable Income 180,000 200,000

    Assume that Higher's tax liability is based on a flat 40% rate.

    Required:
    a. Prepare the journal entry to record Higher's income tax expense for 2006.

    Income tax expense 72,000
    Income taxes payable 72,000
    (To record income tax expenses for 2006)

    b. ...

    Solution Summary

    This posting contains a formatted MS Excel file which illustrates how to perform journal entries for various transactions, including: depreciation, tax expense, and fixed asset purchase.

    $2.19

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