On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $54 million. Ameen uses strai
ght-line depreciation for financial statement reporting and deducted 100% of the equipment’s cost for income tax reporting in 2018. At December 31, 2020, the book value of the equipment was $48 million. At December 31, 2021, the book value of the equipment was $40 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $68 million. Required: 1. Prepare the appropriate journal entry to record Ameen’s 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen’s 2021 net income?
1 answer:
Answer:
Answer for the question:
On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $54 million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100% of the equipment’s cost for income tax reporting in 2018. At December 31, 2020, the book value of the equipment was $48 million. At December 31, 2021, the book value of the equipment was $40 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $68 million. Required: 1. Prepare the appropriate journal entry to record Ameen’s 2021 income taxes. Assume an income tax rate of 25%. 2. What is Ameen’s 2021 net income?
Is given in the attachment.
Explanation:
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Answer:
The variable expense is 36% of monthly expense i.e $2,016.
Explanation:
Data provided in the question:
Monthly income of Mr. Jones = $5,600
Fixed expenses = $2,912
Net income = 12% of monthly income = 0.12 × $5,600 = $672
Now,
Variable expense = Monthly income - Fixed expenses - Net income
= $5,600 - $2,912 - $672
= $2,016
Percent of variable expense =
Hence, the variable expense is 36% of monthly expense i.e $2,016.