Exercise 13-17 (Algorithmic) (LO. 1, 4)
Prance, Inc., earned pretax book net income of $1,005,000 in 2023. During the year, Prance acquired a depreciable asset. Book depreciation for the year was $100,500 while cost recovery for tax purposes was $160,000.
In 2024, Prance reports $703,500 of pretax book net income, and the book depreciation on the asset acquired in 2023 was $80,000 while cost recovery for tax purposes was $25,125. Prance reports no other temporary or permanent book-tax differences. Assume the pertinent U.S. Federal corporate income tax rate is 21% and Prance earned an after-tax rate of return on capital of 4%.
Enter below the 2024 Prance's deferred tax benefit or expense and total tax expense that should be reported on its 2023 balance sheet.
If an amount is zero, enter "0". If required, round your answer to the nearest whole value.
a. Deferred tax benefit or expense
5,276
b. Total tax expense
c. In net present value terms, what has been the value to Prance of accelerating $25,125 of 2024 book depreciation to 2023? The present value factor at 8% is 0.9615.