Question

On January 2, 2013, Arizona Corp. purchased a depreciable asset for $600,000. The asset has an estimated 4 year life with no residual value. Straight-line depreciation is being used for financial statement purposes but the following CCA amounts will be deducted for tax purposes: $150,000 $56,250 2013 2016 2014 225,000 2017 28,125 112,500 2018 2015 28,125 Assuming an income tax rate of 30% for all years, the deferred tax liability that should be reflected on Arizona's statement of financial position at December 31, 2014, should be closest to: Select one: a. $50,625. b. $33,750 c. $45,000. x d. $22,500.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

Answer 3 The correct answer is D) $ 22500 4 5 Calculation 6 Value of asset as per financial statement as on december 31, 2014 7 = cost-accumulated depreciation 8 = 600000-600000/4)*2) 9 = $ 300000 10 11 Value of asset as per CCA 12 = value-depreciation till december 31,2014 13 = 600000-(150000+225000) 14 = $ 225000 15 16 This means excess depreciation claimed in CCA 17 = 300000 -225000 18 = $ 75000 19 20 Deffered tax liability on CCA = 75000*30% 21 = $ 22500 22 23 Thus the correct answer is $ 22500 24