Exercise 16–30
Income Statement
For the fiscal year ended March 31, 2018
($ in millions)
Revenues $ 830
Cost of goods sold (350 )
The FASB Accounting Standards Codification represents the
single source of authoritative U.S. generally accepted accounting principles. The
specific citation for each of the following items is:
1. The specific items to which income tax expense is allocated for intraperiod
tax allocation:
2. The tax rate used to calculate deferred tax assets and liabilities:
3. Required disclosures in the notes to financial statements for the
components of income tax expense:
Problem 16–1
Exercise 16–31
Problems
Requirement 1
RELATED ASSET – CUMULATIVE BALANCE (NOT REQUIRED)
($ in thousands)
Collections Service Revenue
Service previous current Receivable
Revenue year year Balance
2017 $30
Problem 16–1 (continued)
($ in thousands)
Current Future
Year Taxable
2018 Amount
Pretax accounting income 250
Temporary difference:
Taxable income (income tax return) 270
Deferred Tax Liability
Deferred Tax Liability:
12 Ending balance (balance currently needed) $ 4
Journal entry at the end of 2018
Income tax expense (to balance) 100
Problem 16–1 (continued)
Requirement 2
($ in thousands)
Current Future
Year Taxable
2019 Amount
Pretax accounting income 220
Temporary difference:
Taxable income (income tax return) 205
Deferred Tax Liability
Deferred Tax Liability:
4 Ending balance (balance currently needed) $ 10
Journal entry at the end of 2019
Income tax expense (to balance) 88
Problem 16–1 (concluded)
Requirement 3
($ in thousands)
Current Future
Year Taxable
2020 Amount
Pretax accounting income 200
Temporary difference:
2019 services (25) 25
Deferred Tax Liability
Deferred Tax Liability:
10 Ending balance (balance currently needed) $ 2
Journal entry at the end of 2020
Income tax expense (to balance) 80
Problem 16–2
Requirement 1
A liability for deferred subscription revenue is created when subscriptions are
Requirement 2
($ in 000’s)
December 31
2018 2019 2020
Liability—Subscriptions:
$ 0 $ 40 $ 20
Requirement 3
TEMPORARY DIFFERENCE$40 $ 20 $ 50
Problem 16–3
Requirement 1
($ in millions)
Current Future Future
Year Taxable Taxable
2018 Amounts Amounts
2019 2020 2021 [total]
Pretax accounting income 16
Temporary difference:
Deferred Tax Liability
Deferred Tax Liability:
0 Ending balance (balance currently needed) $ 4.8
Journal entry at the end of 2018
Income tax expense (to balance) 6.4
Problem 16–3 (continued)
Requirement 2
($ in millions)
Current Future Future
Year Taxable Taxable
2019 Amounts Amounts
2020 2021 [total]
Pretax accounting income 15
Temporary difference:
Lot sales 4 5 3 8
Deferred Tax Liability
Deferred Tax Liability:
4.8 Ending balance (balance currently needed) $ 2.8
Journal entry at the end of 2019
Income tax expense (to balance) 5.6
Problem 16–3 (concluded)
Requirement 3
The balance in the deferred tax liability account at the end of 2019 would have
been $3.2 million if the new tax rate had not been enacted:
Future taxable amounts $ 8 million
The effect of the change is included in income tax expense, because income
tax expense is less than it would have been if the rate had not changed.