Question

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

	($ in thousands)
	Situation
	1				2				3				4
Taxable income	$	108			$	240			$	244			$	332
Future deductible amounts		16								20				20
Future taxable amounts						16				16				52
Balance(s) at beginning of the year:
Deferred tax asset		2								15				4
Deferred tax liability						8				2

The enacted tax rate is 25%.

Required:
For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.)

		Situation
		1	2	3	4
a.	Income tax payable currently.
b.	Deferred tax asset—ending balance.
c.	Deferred tax asset—change.
d.	Deferred tax liability—ending balance.
e.	Deferred tax liability—change.
f.	Income tax expense.

On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $68 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2020, the book value of the equipment was $62 million and its tax basis was $52 million. At December 31, 2021, the book value of the equipment was $60 million and its tax basis was $45 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2021 was $45 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?

Answer 1