Exercise 16–7
1. Liability—loss contingency
2. Liability—subscriptions
Exercise 16–8
($ in thousands) Situation
1 2 3 4
a. Taxable income $ 85 $215 $195 $260
Tax rate 40% 40% 40% 40%
Exercise 16–9
($ millions) 1 2 3 4 5 6 7 8
PRETAX ACCOUNTING INCOME $100 $100 $100 $100 $100 $100 $100 $100
Temporary differences:
Income statement first:
16–24 Intermediate Accounting, 8/e
Exercise 16–10
Requirement 1
($ in millions)
Current Future
Year Deductible
2016 Amounts
Exercise 16–10 (concluded)
Requirement 2
($ in millions)
Income tax expense (to balance) 74
Deferred tax asset (determined above) 2
16–26 Intermediate Accounting, 8/e
Exercise 16–11
Requirement 1
($ in millions)
Current Future
Year Deductible
2016 Amounts
Temporary difference: (70)
Taxable income 180
Journal entries at the end of 2016
Income tax expense (to balance) 74
Deferred tax asset (determined above) 2
Exercise 16–11 (concluded)
Requirement 2
($ in millions)
Income tax expense (to balance) 74
Valuation Allowance:
10
Ending balance (balance currently needed)
$21
Less: beginning balance (given)
21
16–28 Intermediate Accounting, 8/e
Exercise 16–12
Requirement 1
The specific citation that specifies how a firm should determine whether a
Requirement 2
Specifically, the guidelines are:
740–10–30-17: All available evidence, both positive and negative, is
Exercise 16–13
Requirement 1
($ in thousands)
Current Future
Year Taxable
2016 Amounts
Pretax accounting income 300
Permanent difference:
Deferred Tax Liability
Deferred Tax Liability:
0
Ending balance (balance currently
needed)
$4
Less: beginning balance
4
Exercise 16–14
Requirement 1
($ in thousands)
Current Future Future
Year Taxable Deductible
2016 Amounts Amounts
Pretax accounting income 977
Permanent difference:
16–32 Intermediate Accounting, 8/e
Exercise 16–14 (concluded)
Journal entry at the end of 2016
Income tax expense (to balance) 378
Exercise 16–15
Requirement 1
($ in millions)
Current Future
Year Deductible
2016 Amounts Total
2017 2018 2019 2020
Pretax accounting income 14
Temporary difference:
Journal entry at the end of 2016
Income tax expense (to balance) 5.3
16–34 Intermediate Accounting, 8/e
Exercise 16–16
Requirement 1
($ in millions)
Current Future Future
Year Taxable Taxable
2016 Amounts Amounts
2017 2018 2019 2020 [total]
Pretax accounting income 33
Temporary difference:
Exercise 16–16 (continued)
Requirement 2
($ in millions)
Current Future Future
Year Taxable Taxable
2017 Amounts Amounts
2018 2019 2020 [total]
Pretax accounting income 50
Temporary difference:
Deferred Tax Liability
Deferred Tax Liability
Journal entry at the end of 2017
16–36 Intermediate Accounting, 8/e
Exercise 16–16 (continued)
Requirement 3
($ in millions)
Current Future Future
Year Taxable Taxable
2017 Amounts Amounts
2018 2019 2020 [total]
Pretax accounting income 50
Temporary difference:
Deferred Tax Liability
Deferred Tax Liability
3.2
Ending balance (balance currently needed)
$ 1.8
Less: beginning balance
1.8
Journal entry at the end of 2017
Exercise 16–16 (concluded)
Requirement 4
Without the change, income tax expense in 2017 [requirement 2] is $20
Exercise 16–17
A deferred tax liability is established using the currently enacted tax rate for
the year(s) a temporary difference is expected to reverse. In this case that rate was
40%. The change in the tax law in 2017 constitutes a change in estimate. The
Exercise 16–18
Income tax expense (to balance) ………………………………………… 32,000
Exercise 16–19
Requirement 1
($ in millions)
Income tax expense (to balance) ………………………………………… 80
16–40 Intermediate Accounting, 8/e
Exercise 16–20
Requirement 1
Because the loss year is the company’s first year of operations, the carryback
option is unavailable. The loss is carried forward.
($ in thousands)
Current Future
Year Deductible
2016 Amounts
[total]
Net operating loss (375)
Deferred Tax Asset
Deferred Tax Asset:
Journal entry at the end of 2016
Deferred tax asset (determined above) 150