Tax Accounting project

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Depreciation (BOOK)

Dep Exp Accumulated depreciation Dep Exp Accumulated depreciation Dep Exp Accumulated depreciation Dep Exp Accumulated depreciation NBV
Asset Date placed in Service Cost Life Method 2014 12/31/14 2015 12/31/15 2016 12/31/16 2017 12/31/17
Computers 08/01/14 38,500 4 SL 4,010 4,010 9,625 13,635 9,625 23,260 3,208 26,469 12,031
Store fixtures 08/01/14 12,600 15 SL 350 350 840 1,190 840 2,030 840 2,870 9,730
Chevy S-10 van 08/01/14 48,200 6 SL 3,347 3,347 8,033 11,381 8,033 19,414 8,033 27,447 20,753
Stoves and ovens 08/01/14 16,100 8 SL 839 839 2,013 2,851 2,013 4,864 1,174 6,038 10,063
New computers 05/01/17 45,300 4 SL - 0 - 0 - 0 7,550 7,550 37,750
Worktables 02/01/17 3,000 7 SL - 0 - 0 - 0 393 393 2,607
New stoves and ovens 08/01/17 22,400 8 SL - 0 - 0 - 0 1,167 1,167 21,233
Tesla X 06/01/17 125,000 6 SL - 0 - 0 - 0 9,722 9,722 115,278
New Warehouse 09/01/17 200,000 30 SL 2222 2,222 197,778
New Land 09/01/17 30,000 30,000
Building 08/01/14 425,000 30 SL 5,903 5,903 14,167 20,069 14,167 34,236 14,167 48,403 376,597
Land 08/01/14 50,000 - 0 - 0 - 0 - 0 50,000
Warehouse 08/01/14 88,000 30 SL 1,222 1,222 2,933 4,156 2,933 7,089 2,444 9,533 78,467
Land 08/01/14 12,000 12,000
1,116,100 15,671 15,671 37,611 53,282 37,611 90,893 50,921 141,814 974,286
SOLD IN 2017 (154,600) (42,040)
Balance @ 12/31/17 961,500 99,774 861,726
Sale of assets (per books)
Computers Stoves and ovens Warehouse Land Total
Sales price 8,000 15,000 110,000 18,000 151,000
Net book value 12,031 10,063 78,467 12,000 112,560
Gain/loss (4,031) 4,938 31,533 6,000 38,440
&LBOOK DEPRECIATION

Depreciation (TAX)

*NOTE: YOU NEED TO CHOOSE RECOVERY PERIODS AND DEPRECIATION METHODS BASED ON TYPE OF ASSET. THEN, CALCULATE TAX DEPRECIATION FOR THE LIFE OF EACH ASSET.
Dep Exp Accumulated depreciation Dep Exp Accumulated depreciation Dep Exp Accumulated depreciation section 179 Dep Exp Accumulated depreciation NBV
Asset Date placed in Service Cost Recovery Period* Method* 2014 12/31/14 2015 12/31/15 2016 12/31/16 2017 12/31/17
Computers 08/01/14 38,500 5 mid-year 7,700 7,700 12,320 20,020 7,392 27,412 2,218 29,630 8,870
Store fixtures 08/01/14 12,600 7 mid-year 1,801 1,801 3,086 4,886 2,204 7,090 1,574 8,664 3,936
Chevy S-10 van 08/01/14 48,200 5 mid-year 9,640 9,640 15,424 25,064 9,254 34,318 5,553 39,871 8,329
Stoves and ovens 08/01/14 16,100 7 mid-year 2,301 2,301 3,943 6,244 2,816 9,059 1,005 10,065 6,035
New computers 05/01/17 45,300 5 mid-year - 0 - 0 - 0 45,300 - 0 - 0 45,300
Worktables 02/01/17 3,000 7 mid-year - 0 - 0 - 0 3,000 - 0 - 0 3,000
New stoves and ovens 08/01/17 22,400 7 mid-year - 0 - 0 - 0 22,400 - 0 - 0 22,400
Tesla X 06/01/17 125,000 5 mid-year - 0 - 0 - 0 2,528 2,528 122,472
New Warehouse 09/01/17 200,000 39 mid-month 1,498 1,498 198,502
New Land 09/01/17 30,000 - 0 30,000
Building 08/01/14 425,000 39 mid-month 4,093 4,093 10,897 14,990 10,897 25,887 10,897 36,784 388,216
Land 08/01/14 50,000 - 0 - 0 - 0 - 0 50,000
Warehouse 08/01/14 88,000 39 mid-month 847 847 2,256 3,104 2,256 5,360 1,598 6,958 81,042
Land 08/01/14 12,000 12,000
1,116,100 26,381 26,381 47,926 74,307 34,819 109,127 70,700 26,871 135,997 980,103
SOLD IN 2017 (154,600) (46,653)
Balance @ 12/31/17 961,500 89,345 872,155
SALE OF ASSETS (PER TAX RETURN)
Computers Stoves and ovens Warehouse Land Total
Sales price 8,000 15,000 110,000 18,000 151,000
Net book value 8,870 6,035 81,042 12,000 107,947
Gain/loss (870) 8,965 28,958 6,000 43,053
QUESTION 2
gain on book dep selling 38,440 gain on tax dep selling 43,053
difference (4,613)
QUESTION 3 : Apply Section 179 to assests placed in service in 2017
book dep 2017 50,921 tax dep 2017 97,571
difference (46,650)
&LTAX DEPRECIATION

Income statement

Fanny's Famous Fudge Inc
Statement of income
Year ended 12/31/17
Revenues
Sales revenue $ 2,100,000
Cost of Goods Sold $ (1,260,000)
Gross Profit $ 840,000
Phila School District-Bond interest income 12,000
Gain on sale of fixed assets 38,440
Total revenue 890,440
Expenses
Salaries, officers 225,000
Salaries, other 120,000
Advertising 8,100
Repairs and maintenance 3,200
Taxes and licenses 55,600
Interest expense 7,500
Depreciation expense 50,921
Political contributions - Fudge Makers Lobby 5,000
Officers' life insurance 5,500
Bad debt expense 3,600
Meals and entertainment 4,800
Accounting 6,000
Automobile and truck expense 18,500
Bank charges 600
Insurance 15,200
Janitorial expense 3,200
Legal fees 10,000
Office expense 4,650
Telephone 5,200
Utilities 9,800
Security 6,500
Oven repair 2,100
Shipping 2,000
Total expenses 572,971
Net income before income taxes 317,469
Income tax expense 107,414
Net income $ 210,055
USE SPACE BELOW TO CALCULATE BOOK/TAX DIFFERENCES, TAX EXPENSE PER BOOKS, TAX PAYABLE AND DEFERRED TAX LIABILITY OR ASSET.
permanent book differences temporary differences
Phila School District-Bond interest income (12,000) Bad Debt 3,600
Meals and entertainment 2,400
Officers' life insurance 5,500
Political contributions - Fudge Makers Lobby 5,000
book/ tax diff on gain of sale 4,613
Depreciation Diff (46,650)
Salaries, officers 10,000
Total 900 (28,437)
Book income 317,469 22,250
Permanent differences 900 100,000
Taxable income per book 318,369 0.39
Taxable expense 107,414
Taxable income per book 318,369 22,250
Temporary difference (28,437) 100,000
Taxable income per tax return 289,932 0.39
Tax payable $ 96,323.43
Dr Cr
Tax expense 107,414
Deferred tax liability 11,090
Tax payable 96,323
Ron Unger: Calculate tax expense in space below and fill in here.

Balance sheets

Fanny's Famous Fudge Inc
Balance Sheets
December 31, 2017 and 2016
2017 2016
Assets:
Current assets
Cash $ 229,950 $ 275,000
Accounts receivable 122,500 86,000
Less: allowance for doubtful accounts (6,550) (5,000)
115,950 81,000
Merchandise Inventory 177,000 125,000
Total current assets 522,900 481,000
Fixed assets
Property and equipment, net of accumulated depreciation 861,726 599,507
Other assets:
Deferred Tax Asset - 0 - 0
Total assets $ 1,384,626 $ 1,080,507
Liabilities and Shareholders' Equity
Liabilities:
Current liabilities:
Accounts payable $ 61,750 $ 34,600
Current maturities of long-term debt 85,500 66,000
Income taxes payable 96,323 - 0
Deferred taxes payable 11,090
Officer salaries payable 10,000 - 0
Total current liabilities 264,664 100,600
Mortgage payable 125,000 195,000
Total liabilities 389,664 295,600
Shareholders' Equity
Common stock 5,000 5,000
Retained earnings 989,962 779,907
Total shareholders' equity 994,962 784,907
Total libilities and shareholders' equity $ 1,384,626 $ 1,080,507
0 0
NOTE: ONCE YOU CALCULATE INCOME TAX EXPENSE, TAX LIABILITY AND DEFERRED TAX (ASSET OR LIABILTY), YOU WILL NEED TO ADJUST ALL OR SOME OF THE 2017 BALANCE SHEET ITEMS THAT ARE HIGHLIGHTED.