Markes Corporation's partial income statement after its first year of operations is as follows:
Markes uses the straight -line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,500,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

Question

Markes Corporation's partial income statement after its first year of operations is as follows:
 Markes uses the straight -line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,500,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

Quizplus · Accepted Answer

(30% × Temporary Difference) = $90,000; Temporary
 Difference = ($90,000 ÷ 30%) = $300,000; 
$1,500,000 + $300,000 = $1,800,000.

Markes Corporation's Partial Income Statement After Its First Year of Operations