Question

14) At 12/31/2017, Mr.Speakers needs to record $36,017 of depreciation expense ($8,000 for general equipment, $1,350 for the SR1, $10,000 for the first building, and $16,667 for the leased retail space). However, depreciation expense for tax purposes is $39,213. a. Prepare the journal entry to record depreciation as of 12/31/2017. b. Is this a temporary or permanent book tax difference

Answer 1

Mr. Speakers

a. Journal Entry

Debit Depreciation Expenses:

General equipment $8,000

SR1 $1,350

First building $10,000

Leased retail space $16,667

Credit Accumulated Depreciation $36,017

To record the depreciation expenses for the year.

b. The difference between the tax depreciation expense of $39,213 and the accounting depreciation expense of $36,017 is a temporary difference.

Step-by-step explanation:

Temporary differences arise when, for example, the tax depreciation expense is higher than the accounting depreciation expense. Such differences give rise to deferred tax liabilities or assets. Mr. Speaker will pay more tax in the future than it is paying in the current year.