Blue Collar Clothing Inc acquired a new fabric cutting

machine #3228
Blue Collar Clothing, Inc. acquired a new fabric- cutting machine at the beginning of the current
year. The machine cost $ 600,000, with no residual value expected. Blue Collar uses the
straight- line method for financial reporting assuming a six- year useful life. The firm classifies
the equipment as five- year MACRS property for tax purposes using the following
percentages.Year MACRS %1 …………… 20.00%2 …………… 32.00%3 …………… 19.20%4 …………
…………… 11.52%6 …………… 5.76%The company is subject to a 40% income tax rate and has no oth
book- tax differences. We present Blue Collar’s income before tax and depreciation below:Year
Income Before Tax and Depreciation1 ……………………… $ 850,0002 ……………………… 900,0003 …
930,0004 ……………………… 1,100,0005 ……………………… 1,400,0006 ……………………… 1,850,0
supporting computations.) a. Prepare all journal entries required to record Blue Collar’s income
tax provision for years 3 and 4. b. What is the balance of the deferred tax account at the end of
year 3? c. What is reported net income for years 3 and 4?View Solution:
Blue Collar Clothing Inc acquired a new fabric cutting machine

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