Fox, Co. reported taxable income of $600,000 in 2020, $800,000 in 2021, and $1,0

Question

Fox, Co. reported taxable income of $600,000 in 2020, $800,000 in 2021, and $1,000,000 in 2022, and pre-tax book income of $300,000 in 2020, $800,000 in 2021, and $1,300,000 in 2022. The tax rate is 30% in 2020, but under tax changes already enacted into law it will increase to 35% in 2021 and 40% in 2022. Assuming any differences are temporary, originated in 2020 and reverse in 2022, which of the following is included in Fox's tax entry at the end of 2020, the 1st? $120,000 DTA $90,000 DTA $90,000 DTL $120,000 DTL


Fox Co. leased a machine under a capital (finance) lease for a period of 10?years, contracting to pay? $100,000 on signing the lease on December? 31, 2019, and ?$100,000 annually on December 31 of each of the next 9 years. The present value at December? 31, 2019 of the 10 lease payments discounted at? 10% was? $676,000. If Fox made all lease payments timely, at December? 31, 2020, Fox’s total capital? (finance) lease liability ?is: $533,600 $607,960 $518,400 $486,000 Fox, Co. reported taxable income of $600,000 in 2020, $800,000 in 2021, and $1,000,000 in 2022, and pre-tax book income of $300,000 in 2020, $800,000 in 2021, and $1,300,000 in 2022. The tax rate is 30% in 2020, but under tax changes already enacted into law it will increase to 35% in 2021 and 40% in 2022. Assuming any differences are temporary, originated in 2020 and reverse in 2022, which of the following is included in Fox's tax entry at the end of 2020, the 1st? $120,000 DTA $90,000 DTA $90,000 DTL $120,000 DTL


Fox Co. leased a machine under a capital (finance) lease for a period of 10?years, contracting to pay? $100,000 on signing the lease on December? 31, 2019, and ?$100,000 annually on December 31 of each of the next 9 years. The present value at December? 31, 2019 of the 10 lease payments discounted at? 10% was? $676,000. If Fox made all lease payments timely, at December? 31, 2020, Fox’s total capital? (finance) lease liability ?is: $533,600 $607,960 $518,400 $486,000 Fox, Co. reported taxable income of $600,000 in 2020, $800,000 in 2021, and $1,000,000 in 2022, and pre-tax book income of $300,000 in 2020, $800,000 in 2021, and $1,300,000 in 2022. The tax rate is 30% in 2020, but under tax changes already enacted into law it will increase to 35% in 2021 and 40% in 2022. Assuming any differences are temporary, originated in 2020 and reverse in 2022, which of the following is included in Fox's tax entry at the end of 2020, the 1st? $120,000 DTA $90,000 DTA $90,000 DTL $120,000 DTL


Fox Co. leased a machine under a capital (finance) lease for a period of 10?years, contracting to pay? $100,000 on signing the lease on December? 31, 2019, and ?$100,000 annually on December 31 of each of the next 9 years. The present value at December? 31, 2019 of the 10 lease payments discounted at? 10% was? $676,000. If Fox made all lease payments timely, at December? 31, 2020, Fox’s total capital? (finance) lease liability ?is: $533,600 $607,960 $518,400 $486,000 Fox Co. leased a machine under a capital (finance) lease for a period of 10?years, contracting to pay? $100,000 on signing the lease on December? 31, 2019, and ?$100,000 annually on December 31 of each of the next 9 years. The present value at December? 31, 2019 of the 10 lease payments discounted at? 10% was? $676,000. If Fox made all lease payments timely, at December? 31, 2020, Fox’s total capital? (finance) lease liability ?is: $533,600 $607,960 $518,400 $486,000

Explanation / Answer

2

1 The deferred tax liability at the end of 2020 should be based on tax rates, already enacted (not just proposed) by the end of 2020, for years in which the DTL is expected to reverse: 2021,2022 =600000-300000 =300000 tax @ 30% 90000 DTL$

2

$ 533,600 = $676,000 initial lease liability - $100,000 1stpayment - $42,400 2ndpayment (below) $42400 lease reduction = $100,000 2ndpayment - $57,600 interest [(676k-100k) * 10%

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