[Solved] SOLVED: Accounting for income taxes

Accounting for income taxes What would you say? Background The Cordoba Company (Cordoba), a Spanish manufacturer of fine sailing pleasure boats, purchased a fiberglass molding machine on January 1, 2008 for 100,000. The useful life of the molding machine for book purposes is ten years on a straight-line basis. The Spanish tax authorities allow for depreciation over five years on a straight-line basis. The tax rate in Spain is 35%. The book basis, the tax basis, and the balance in the deferred tax liability account of the machine for the first 5 years were as follows: Year Book cost Book accumulated depreciation Book basis Tax cost Tax accumulated depreciation Tax basis Deferred tax liability 2008 100,000 10,000 90,000 100,000 20,000 80,000 3,500 2009 100,000 20,000 80,000 100,000 40,000 60,000 7,000 2010 100,000 30,000 70,000 100,000 60,000 40,000 10,500 2011 100,000 40,000 60,000 100,000 80,000 20,000 14,000 2012 100,000 50,000 50,000 100,000 100,000 0 17,500 Required On December 31, 2010, after recording its year end journal entries, Cordoba receives an offer to sell the fiberglass molding machine to an Italian sailboat company, Vela, for 120,000. Cordoba has a short window to consider their options regarding this machinery as Vela would like to complete the transaction on January 1, 2011. Cordoba has asked you to quickly prepare a presentation including supporting schedules (and relevant journal entries) to help explain the tax accounting ramifications for their options under both US GAAP and IFRS. What will you say?