On January 1, 2013, Ameen Company purchased a building for $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2015, the book value of the building was $30 million and its tax basis was $20 million. At December 31, 2016, the book value of the building was $28 million and its tax basis was $13 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2016 was $45 million.

Required:
Prepare the appropriate journal entry to record Ameen's 2016 income taxes. Assume an income tax rate of 40%.

income tax expense 18,000,000 debit

defferred income tax-liability   2,000,000 credit

income tax payable                 16,000,000 credit

Explanation:

the building was depreciate by 2 millon by the company

(30 millon beginning less 28 million ending = 2 depreciation )

Then, for tax purposes it was depreciate for 7 million

(20 beginning  less 13 ending = 7 million depreciation)

The tax temporary difference is for 5 million

We will apply the tax rate to it and solve for the tax liability (as in the future we will keep doing a depreciation expense but will not be deductible as the tax basis of the building reach zero already)

5,000,000 x 40% = 2,000,000 tax laibility

45,000,000 - 5,000,000 = 40,000,000 taxable income

40,000,000 x 40% = 16,000,000 income tax payable

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough

answer utilities; more money you have to pay out ; )