2) On January 1, 2014 AJAX Company signed a lease to rent a store in the new mal

Question

2) On January 1, 2014 AJAX Company signed a lease to rent a store in the new mall for the next 5 years. Under the terms of this lease, AJAX had to pay $10 million immediately (January 1, 2014) and $2 million each year (for a total of $20 million in payments) For tax purposes, the $10 million can be deducted immediately while for GAAP it must be amortized over the 5 years. This is the only difference between AJAX’s book and tax income.    Before rent expense and income tax, AJAX had the following income amounts each year: 2014 $23 million 2015 $33 million 2016 $44 million 2017 $33 million 2018 $33 million.  

a) Determine:   income tax expense, income tax payable, deferred tax asset at the end of 2014 if the tax rate is 30%

b) determine: income tax expense, income tax payable, deferred tax asset at the end of 2015 if the tax rate is still 30%

c) In 2016, Congress passed a new tax law which will cause AJAX’s tax rate to be 20% beginning in 2017, but remain 30% in 2016. Determine income tax expense, income tax payable and deferred tax asset at the end of 2016.

Explanation / Answer

ANSWER:

            We are 90% confident that the mean family dental expenses for all employees of this corporation is between $199.26 and $333.74.

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