At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account

E16-24 (Balance Sheet Classification)

At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:

1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Bad debt expense, $25 million: allowance method for accounting; direct write-off for tax purposes.

Required:
Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.

Click here for the solution: At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account

Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account

E19-3 (One Temporary difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account. At the end of 2008, the related cumulative difference amounts to $350,000 and it will reverse evenly over the next 2 years. Pretax accounting income for 2008 is $525,000, the tax rate for all years is 40% and taxable income for 2008 is $405,000.

Instructions
a.) Compute income taxes payable for 2008
b.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2008.
c.) Prepare the income tax expense section of the income statement for 2008 beginning with the line "Income before income taxes"

Click here for the solution: Bandung Corporation began 2008 with $92,000 balance in Deferred Tax Liability account

Which of the following would never require reporting deferred tax assets or deferred tax liabilities?

MULTIPLE CHOICE

1. Which of the following would never require reporting deferred tax assets or deferred tax liabilities? (Points : 1)

2. Which of the following statements typifies defined contribution plans? (Points : 1)

3. Which of the following causes a temporary difference between taxable and pretax accounting income? (Points : 1)

4. Consider the following:
A. I present value of vested benefits at present pay levels
B. II present value of nonvested benefits at present pay levels
C. III present value of additional benefits related to projected pay increases

Which of the above constitutes the accumulated benefit obligation? (Points : 1)

5. Of the following temporary differences, which one ordinarily creates a deferred tax asset? (Points : 1)

6. The annual pension expense for what type of pension plan(s) is recorded by a journal entry that includes a debit to pension expense and a credit to the pension asset or pension liability? (Points : 1)

7. The postretirement benefit obligation is the: (Points : 1)

8. When the service method is used for amortizing prior service costs, the amount recognized each year is (Points : 1)

9. The result of interperiod tax allocation is that: (Points : 1)

10. Which of the following statements is true regarding SFAS 109 and its use of the asset and liability approach? (Points : 1)


Click here for the solution: Which of the following would never require reporting deferred tax assets or deferred tax liabilities?

At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable

E 16-10 Deferred tax asset; taxable income given; valuation allowance

At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book–tax difference of $75 million in a liability for estimated expenses. At the end of 2011, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2011 is $180 million and the tax rate is 40%.

Required:
1. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that the deferred tax asset will be realized.
2. Prepare the journal entry(s) to record Payne's income taxes for 2011, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized.

Click here for the solution: At the end of 2010, Payne Industries had a deferred tax asset account with a balance of $30 million attributable