Professional Documents
Culture Documents
Item
Description
BE19-3
BE19-12
BE19-13
E19-2
E19-4
E19-17
E19-20
E19-22
E19-24
P19-3
P19-5
P19-9
Year
2012
$ 225,000
(40,000 )
$ 185,000
55,500
12,000
Temporary
Difference
Depreciation
1/1/12
12 JE
12/31/12
Future Taxable
(Deductible) Amounts
($40,000)
Tax
Rate
30%
55,500
12,000
Deferred Tax
Asset
Liability
$12,000
0
12,000
12,000
Balance Sheet Reporting: The $12,000 deferred tax liability is classified as a long-term liability (since the related PP&E is classified as noncurrent).
144,000
144,000
140,000
60,000
140,000
60,000
EXERCISE 19-2
Year
2012
2013
Depreciation Expense
Tax
Accounting
?
?
?
?
Year
2012
2013
Rent Revenue
Tax
Accounting
$ 25,000
$ 0
0
25,000
(a)
(b)
134,000
6,000
10,000
Temporary
Difference
Depreciation
Unearned rent
1/1/12
12 JE
12/31/12
Future Taxable
(Deductible) Amounts
($40,000)
((25,000)
$ 350,000
(40,000 )
25,000
$ 335,000
Tax
Rate
40%
40%
134,000
16,000
Deferred Tax
Asset
Liability
$16,000
$10,000
0
16,000
16,000
130,000
6,000
4,000
Temporary
Difference
Depreciation
12/31/12
12/31/13
Future Taxable
(Deductible) Amounts
($30,000)
10,000
Tax
Rate
40%
13 JE
130,000
10,000
Deferred Tax
Asset
Liability
$12,000
16,000
12,000
EXERCISE 19-4
(a)
(b)
30,600
8,100
Temporary Difference
Depreciation
Unearned rent revenue
1/1/12
12 JE
12/31/12
(c)
(d)
Future Taxable
(Deductible) Amounts
($16,000)
((27,000)
$ 80,000
(16,000)
27,000
11,000
$ 102,000
Tax
Rate
30%
30%
30,600
4,800
3,300
Deferred Tax
Asset
Liability
$4,800
$8,100
0
4,800
4,800
$80,000
$30,600
(3,300 )
27,300
$52,700
EXERCISE 19-17
Year
2012
2013
2014
Year
2012
2013
2014
Warranty Costs
Tax
Accounting
$ 5,000
$ 15,000
5,000
0
5,000
0
73,350
2,400
4,000
Temporary Difference
Installment sales GP
Warranty costs
Future Taxable
(Deductible) Amounts
($16,000)
( (10,000))
Tax
Rate*
40%
40%
73,350
6,400
Deferred Tax
Asset
Liability
$6,400
$4,000
* note that since the new 40% tax rate was enacted into law on Jan. 1, 2012, this future tax rate should be used
to compute deferred taxes at the end of 2012.
2013: Current Income Tax Expense.........................................................................
Income Tax Payable ($213,000 x 40%) ..............................................
85,200
3,200
Temporary Difference
Installment sales GP
Warranty costs
Future Taxable
(Deductible) Amounts
($8,000)
( (5,000))
Tax
Rate
40%
40%
85,200
2,000
1,200
Deferred Tax
Asset
Liability
$3,200
$2,000
37,200
3,200
Calculation of JE amounts:
Deferred Tax Asset
1/1/12
0
12 JE
4,000
12/31/12
4,000
13 JE
12/31/13
2,000
14 JE
12/31/14
0
2,000
13 JE
2,000
14 JE
37,200
2,000
1,200
0
6,400
6,400
3,200
0
EXERCISE 19-20
Year
2012
2013
2014
2015
Depreciation Expense
Tax
Accounting
$?
$?
?
?
?
?
?
?
* tax basis $340,000 vs book basis $400,000 (since tax basis is smaller than accounting basis, this means that
tax depreciation has been larger than accounting depreciation in the past)
Year
2012
2013
(a)
Warranty Costs
Tax
Accounting
$
0
$ 150,000
150,000
0
187,000
51,000
Temporary Difference
Depreciation Expense (13-14)
Depreciation Expense (15)
Warranty Costs (13)
Total
1/1/12
12 JE
12/31/12
(b)
Future Taxable
(Deductible) Amounts
($50,000
10,000
(150,000)
Tax
Rate
34%
30%
34%
187,000
20,000
31,000
Deferred Tax
Asset
Liability
$17,000
3,000
$51,000
$51,000
$20,000
0
20,000
20,000
Current assets
Deferred tax asset
$51,000
Long-term liabilities
Deferred tax liability
$20,000
Note: The deferred tax asset is classified as current because the related warranty obligation is a current
liability. The deferred tax liability is classified as noncurrent because the related plant assets are longterm.
EXERCISE 19-22
Year
2012
2013
2014
Accounts Receivable
Tax
Accounting
$?
$?
?
?
?
?
* Note: past difference equals tax basis $0 vs. accounting basis $50,000 which would result when revenues
accrued for accounting purposes were greater than the revenues for tax purposes, resulting in taxable income
being less than accounting income
Year
2012
2013
** Note: past difference equals tax basis $0 vs. accounting basis $20,000 which would result when a loss has
been accrued for accounting purposes but not for tax purposes; therefore, the past taxable income would be
greater than accounting income
(a)
102,000
10,200
6,800
Temporary Difference
Accounts receivable
Litigation liability
1/1/12
12 JE
12/31/12
(b)
Future Taxable
(Deductible) Amounts
($ 50,000)
( (20,000)
17,000
Deferred Tax
Liability
*$17,000*
$6,800
Asset
0
17,000
17,000
A net deferred tax liability of $10,200 will be reported on the balance sheet in current liabilities.
Balance Sheet Account Related to
Related to Temporary Difference
Accounts receivable
Litigation loss liability
Net
Tax
Rate
34%
34%
102,000
Classification
Current*
Current
The deferred tax liability is current because the related accounts receivable is classified as a current asset since the operating cycle of the business is two years.
EXERCISE 19-24
(a)
2011
Current Income Tax Expense......................................................................
Income Tax Payable ($100,000 X 40%)...........................................
40,000
2012
Current Income Tax Expense......................................................................
Income Tax Payable ($90,000 X 40%) .............................................
36,000
2013
Income Tax Refund Receivable [($100,000 X 40%) + ($90,000 X 40%)] ...
Current Income Tax Benefit .............................................................
76,000
40,000
36,000
76,000
22,500
11,250
11,250
(c)
31,500
31,500
11,250
11,250
22,500
$(240,000)
$76,000
11.250
( 87,250
$(152,750 )
$120,000
$31,500
22,500
(11,250 )
42,750
$ 77,250
* note that GAAP actually requires deferred income tax expense to be presented exclusive of the
amount attributed to operating loss carryforwards the sum of $22,500 and $(11,250) equals the debit
to Deferred Income Tax Expense of $11,250 in the journal entry.
PROBLEM 19-3
Year
2012
2013
Depreciation Expense
Tax
Accounting
$120,000
$150,000
240,000
150,000
Note: This is an unusual situation where in the first year there is a future deductible amount, and in the second
and all remaining years, it switches to a future taxable amount.
(a)
(b)
437,500
31,500
Temporary Difference
Depreciation Expense
12/31/12*
12/31/13
$1,400,000
(60,000)
(90,000)
1,250,000
Future Taxable
(Deductible) Amounts
$60,000
10,500
Tax
Rate
35%
437,500
21,000
10,500
Asset
Deferred Tax
Liability
*$21,000*
0
21,000
21,000
$1,200,000
399,000
801,000
130,000
$ 931,000
* equals $437,500 total current income tax expense less $70,000 ($200,000 x 35%) allocated to the
extraordinary gain (note: this type of tax allocation is intraperiod tax allocation)
(d)
Long-term liabilities
Deferred tax liability
$21,000
note: deferred tax liability is classified as noncurrent because the related balance sheet account resulting in the temporary difference (net equipment) is classified as long-term
PROBLEM 19-5
(a)
2012
Income Tax Refund Receivable [($50,000 X 30%) + ($80,000 X 40%)] .........
Current Income Tax Benefit ................................................................
47,000
47,000
20,000
20,000
* use 40% rate from 2013 since problem says that loss carryforward is expected to be realized in
year immediately following the loss
2013
Current Income Tax Expense..........................................................................
Income Tax Payable [($70,000 $50,000) X 40%] ............................
Deferred Income Tax Expense........................................................................
Deferred Tax Asset ($0 balance needed in account) ...........................
2014
Current Income Tax Expense..........................................................................
Income Tax Payable ($100,000 X 35%)...............................................
8,000
8,000
20,000
20,000
35,000
35,000
(b)
(c)
(d)
$(180,000)
$47,000
20,000
( 67,000
$(113,000 )
$70,000
$ 8,000
20,000
28,000
$42,000
PROBLEM 19-9
(a)
(b)
Temporary Difference
Warranty costs
Construction profits
Depreciation
Totals
(c)
3,500
(1,500 )
5,000
(25,000 )
(20,000 )
$ 62,000
Tax
Rate
40%
40%
40%
Deferred Tax
Asset
Liability
$2,000
*$10,000
0(0,000)
* 8,000
$2,000
*$18,000
24,800
16,000
2,000
1/1/13
13 JE
12/31/13
(d)
Future Taxable
(Deductible) Amounts
($ (5,000)
( 25,000)
( 20,000
$100,000
24,800
18,000
0
18,000
18,000
$100,000
$24,800
16,000
40,800
$ 59,200