On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $54 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2023, the book value of the equipment was $48 million and its tax basis was $38 million. At December 31, 2024, the book value of the equipment was $46 million and its tax basis was $31 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $35 million. Required: Prepare the appropriate journal entry to record Ameen’s 2024 income taxes. Assume an income tax rate of 25%. What is Ameen’s 2024 net income?
On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $54 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2023, the book value of the equipment was $48 million and its tax basis was $38 million. At December 31, 2024, the book value of the equipment was $46 million and its tax basis was $31 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $35 million.
Required:
- Prepare the appropriate
journal entry to record Ameen’s 2024 income taxes. Assume an income tax rate of 25%. - What is Ameen’s 2024 net income?
The deferred tax liability decreases the current liability for the tax, which means deferred tax liability is the amount of tax that has not been paid but it will be paid in the future, it increases the tax liability in future years.
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In Step 1 the income tax expense of $8,750,000 is correct. The
In Step 2 the net income is correct.
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