Exercise 16–22
Requirement 1
($ in thousands)
Current Future
Prior Years Year Deductible
2016 2017 2018 Amounts
[total]
Net operating loss (160)
Deferred Tax Asset Deferred Tax Asset:
Journal entry at the end of 2018
Exercise 16–22 (concluded)
Requirement 2
($ in thousands)
Operating loss before income taxes $(160)
Income tax benefit:
Exercise 16–23
L 1. Advance payments on insurance; tax-deductible when paid.
A 2. Estimated warranty costs; tax-deductible when paid.
Exercise 16–24
($ in millions)
Future
Taxable Deferred
Related Balance (Deductible) Tax Tax (Asset)
Sheet Account Amounts Rate Liability
Liability—Warranty expense (15) x 40% (6)
Net noncurrent liability 52
Exercise 16–25
Requirement 1
($ in thousands)
Current Future
Year Taxable
Amounts
2018 2019 2020 2021
Pretax accounting income 810
Permanent difference (10)
Temporary difference:
Deferred Tax Liability Deferred Tax Liability:
Journal entry at the end of 2018
Requirement 2
($ in thousands)
Exercise 16–26
Requirement 1
($ in thousands)
Current Future Taxable Deferred
Year (Deductible) Tax
Amounts Liab. Asset
2018 2019 2020 2021
Pretax accounting income 810
Permanent difference (10)
Temporary differences:
Installment sales (600) 150 250 200
Taxable income (tax return) 260
Deferred Tax Asset Deferred Tax Liability
0 0
Exercise 16–26 (concluded)
Journal entry at the end of 2018
Income tax expense (to balance) 281
Requirement 2
($ in thousands)
Pretax income $810
Exercise 16–27
Requirement 1
If all of Lange’s deferred tax assets and liabilities are in the same tax jurisdiction,
Requirement 2
If the deferred tax effects of Lange’s pension plans and unrealized gains on
investments occurred in a different tax jurisdiction from Lange’s other deferred tax
Exercise 16–28
List A List B
g 1. No tax consequences a. Deferred tax liability
e 2. Originates, then reverses b. Deferred tax asset
h 3. Revise deferred tax amounts c. 2 years
Exercise 16–29
Requirement 1
Probability table:
Amount of the tax benefit that management expects to
sustain $10 $8 $6 $4 $2
Percentage likelihood that the tax position will be
$6 million is the amount of tax benefit that would be recognized in the financial
statements; it represents the largest amount of benefit that is more than 50 percent
likely to be the end result.
Requirement 2
Delta would record tax expense as if there is a $6 million tax credit, income tax
payable that reflects the entire $10 million credit, and a liability that represents the
potential obligation to pay the additional taxes if the deduction is not ultimately
upheld:
($ in millions)
Income tax expense ([$85 x 40%] – $6* tax credit) 28
The Liability–projected additional tax represents the eventual additional tax
payment for the $4 million not included in the current income tax payable. The