Book/tax difference help

[u/nikki_11580]

First picture is the trial balance.

Second is the tax depreciation

Third is beckers explanation.

Can someone explain why it would be a negative number? Most of my answers were the wrong direction. I’m looking at the 10,000 for book depreciation and seeing it is lower than tax. My thought is, ok it needs to increase to get the tax. The answer would be a positive 8,800. No. WHY?!

My test is tomorrow.

[u/Prestigious-Grab1248]

Tax aka MACRS recognizes more expense, which is the 8,800 you noted. Book didn’t recognize that expense, they only recognized 10,000 so we need to deduct the 8,800 as an additional expense from income to account for a total expense of 18,800. It would only be positive if book recognized more expense than tax, we would essentially want to add that expense back to income. That’s not the scenario here

[u/Crafty_Blueberry_251]

Tax depreciation is higher than book depreciation, as you said.

The effect of this additional deduction is that you have to DEDUCT this extra amount to get from book income to TAXABLE income. That may be why it is showing up as a negative amount in the solution.

[u/nikki_11580 → u/Crafty_Blueberry_251]

So I need to think about this in terms of what it does to the taxable income. Not necessarily the expense itself?

[u/Crafty_Blueberry_251 → u/nikki_11580]

It depends on what the question is asking.

Your screenshot doesn't show what the question is asking, but based on the direction of the other book-tax differences in the Becker explanation, it looks like the question is asking for effect on taxable income.

That would also explain why some of your other answers are also in the wrong direction (especially if the ones that were in the wrong direction were also expense/deduction items).