Amelia, Inc Amelia, Inc Amelia, Inc

question 146

Essay

Amelia, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.

$\begin{array}{lcc}&\text { Tax Debit/(Credit) }&\text {Book Debit/(Credit) }\\\text { Assets }\\\text { Cash } & \$ 1,200 & \$ 1,200 \\\text { Accounts Receivable } & 20,000 & 20,000 \\\text { Buildings } & 1,200,000 & 1,200,000 \\\quad \text { Accumulated Depreciation } & (600,000) & (320,000) \\\text { Furniture \& Fixtures } & 160,000 & 160,000 \\\quad \text { Accumulated Depreciation } & \underline{(84,000)} & \underline{(60,000)} \\\text { Total Assets } & \underline{\underline{\$ 697,200}} & \underline{\underline{\$ 1,001,200}}\\\\\text { Liabilities }\\\text { Accrued Vacation Pay } & \$-0- & (\$ 108,000) \\\text { Note Payable } & \underline{(464,000)}& \underline{(464,000) }\\\text { Total Liabilities } & \underline{(\$ 464,000)} & \underline{(\$ 572,000)}\\\\\text { Paid in Capital } & (\$ 4,000) & (\$ 4,000) \\\text { Retained Earnings } & \underline{(229,200)} & \underline{(425,200)} \\\text { Total Liabilities and } \text { Stockholders' Equity } & \underline{ \underline{(\$ 697,200)}} & \underline{\underline{(\$ 1,001,200)}} \\\end{array}$


Amelia, Inc.’s, gross deferred tax assets and liabilities at the beginning of Amelia’s year are listed below.
$$\begin{array} { l r } & \text { Beginning of Year } \\\text { Accrued Vacation Pay } & \$ 84,000 \\\text { Subtotal } & \$ 84,000 \\\text { Applicable Tax Rate } & \times 34 \% \\\text { Gross Deferred Tax Asset } & \$ 28,560 \\\text { Building - } & ( \$ 244,000 ) \\\quad \text { Accumulated Depreciation } & \\\text { Furniture \& fixtures - } & ( 12,800 ) \\\quad \text { Accumulated Depreciation } & \\\text { Subtotal } & ( \$ 256,800 ) \\\text { Applicable tax rate } & \times 34 \% \\\text { Gross deferred tax liability } & \underline { ( \$8 7,312 ) } \\\end{array}$$
Amelia, Inc.’s, book income before tax is $25,200. Amelia records two permanent book-tax differences.
It earned $1,000 in tax-exempt municipal bond interest and $1,840 in nondeductible meals and
entertainment expense. Provide the income tax footnote rate reconciliation for Amelia, using either dollars or percentages.

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Definitions:

Per Capita Income

Per capita income is the average income earned per person in a given area or country, calculated by dividing the total income of the area by its population.

Birth Rates

Birth rates refer to the number of live births per 1,000 people in a population over a given time period, a key indicator of population growth.

Newly Industrialized

Describes countries that have moved from primarily agricultural to primarily manufacturing and industrial activities.

Human Capital

Human capital is the collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.