PROBLEM 19-5B (Continued)
(c) 2014 Income Statement
Operating loss before income taxes …………… $(140,000)
(d) 2016 Income Statement
Income before income taxes ………………………. $60,000
Income tax expense
Current ………………………………………………. $ 1,500a
Deferred …………………………………………….. 16,500 18,000
Net income ……………………………………………….. $42,000
PROBLEM 19-6B
1.
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
Deferred Tax
(Asset)
Liability
2015
$ 400
30%a
$ 120
2016
30%b
2016
30%b
2017
40%c
120
2019
400
40%e
GLIDING CO.
Balance Sheet
December 31, 2014
Other assets (noncurrent)
Deferred tax asset ($960 – $635) ………………………………… $325
2.
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
Deferred Tax
(Asset)
Liability
2015
$ 400
30%a
$ 120
2016
400
30%b
120
2017
40%c
120
2018
120
2018
40%d
PROBLEM 19-6B (Continued)
BOOTHILL CO.
Balance Sheet
December 31, 2014
PROBLEM 19-7B
(a) Before deferred taxes can be computed, the amount of cumulative tem-
porary difference existing at the end of each year must be computed:
2014
2015
2016
Pretax financial income
$330,000
($120,000
($120,000
Taxable income
190,000
190,000
( 190,000
$ 70,000
2014
Income Tax Expense ……………………………………….. 99,000
Income Taxes Payable ………………………………. 57,000
Deferred Tax Liability ………………………………… 42,000
Temporary
Difference
Future Taxable
(Deductible)
Amounts
Tax
Rate
December 31, 2015
Deferred Tax
(Asset)
Liability
Installment Accounts
Receivable
(
$ 140,000
30%a
$42,000
PROBLEM 19-7B (Continued)
Deferred tax expense for 2014 ……………………………………….. $42,000
Current tax expense for 2014 (Income taxes payable) ……… 57,000
Income tax expense for 2014 …………………………………………. $99,000
2015
Income Tax Expense ……………………………………….. 14,000
Deferred Tax Liability ………………………………… 14,000*
*Cumulative temporary difference at the end of 2014 ………… $140,000
Newly enacted tax rate for future year ……………………………. X 40%
Adjusted balance of deferred tax liability at the end
of 2014 ……………………………………………………………………… 56,000
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
December 31, 2015
Deferred Tax
(Asset)
Liability
Installment Accounts
Receivable
$70,000
40%b
$28,000
bTax rate enacted for 2015.
PROBLEM 19-7B (Continued)
Deferred tax benefit for 2015 ………………………………………….. $(28,000)
Current tax expense for 2015 (Income taxes payable) ……… 76,000
Income tax expense for 2015 …………………………………………. $48,000
2016
Temporary
Difference
Future Taxable
(Deductible)
Amounts
Tax
Rate
December 31, 2016
Deferred Tax
(Asset)
Liability
Installment Accounts
Receivable
(
$—0—
40%
$—0—
Deferred tax liability at the end of 2016 …………………………... $ 0
(b) December 31, 2014
Current liabilities
Deferred tax liability ……………………………………………….. $42,000
December 31, 2015
PROBLEM 19-7B (Continued)
(c) 2014
Income before income taxes ………………………………… $330,000
Income tax expense
Current ………………………………………………………… $57,000
Deferred ………………………………………………………. 42,000 99,000
Net income …………………………………………………………. $231,000
2015
2016
Income before income taxes ………………………………… $120,000
PROBLEM 19-8B
(a)
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
Deferred Tax
(Asset)
Liability
Depreciation
$(32,000)*
30%
$(9,600)
(b) Income Tax Expense …………………………………….. 71,400
Deferred Tax Asset ……………………………………….. 9,600
Income Taxes Payable ……………………………. 81,000
$81,000 taxes due for 2014 ÷ 30% 2014 tax rate = $270,000 taxable
income for 2014.
(c) Income before income taxes ………………………….. $238,000a
Income tax expense
Current ………………………………………………….. $81,000
Deferred ………………………………………………… (9,600) 71,400
PROBLEM 19-8 (Continued)
Book Depreciation
Tax Depreciation
bDifference
2014
$64,000
$ 32,000*
($ 32,000
2015
64,000
64,000
0
2016
2017
2018
2019
( (32,000)
($ 0
(d)
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
Deferred Tax
(Asset)
Liability
Depreciation
$ (32,000)
30%
$(9,600)
(60,000)
Temporary
Difference
Resulting Deferred Tax
Related Balance
Sheet Account
Classification
(Asset)
Liability
Depreciation
$(9,600)
Plant Assets
Noncurrent
Unearned Rent
Current
Unearned rent
Noncurrent
Current assets
Deferred tax asset …………………………..……………………… $18,000
PROBLEM 19-8B (Continued)
(e) Income Tax Expense ……………………………………… 60,000
Deferred Tax Asset ………………………………………… 36,000
Income Taxes Payable …………………………….. 96,000
Deferred tax asset at the end of 2015 ……………………………… $ 45,600
Deferred tax asset at the beginning of 2015 ……………………. 9,600
Deferred tax benefit for 2015 (increase in
deferred tax asset) …………………………………………………….. $ (36,000)
(f) Income before income taxes ……………………………. $200,000d
Income tax expense
Current ……………………………………………………. $96,000
Deferred ………………………………………………….. (36,000) 60,000
Net income …………………………………………………….. $140,000
PROBLEM 19-9B
(a) Pretax financial income …………………………………………………. $250,000
Permanent differences:
Fine for pollution ……………………………………………………. 4,000
Taxable income …………………………………………………………….. $169,000
(b)
Temporary
Difference
Future Taxable
(Deductible) Amounts
Tax
Rate
Deferred Tax
(Asset)
Liability
Warranty costs
$ (16,000)
35%
$(5,600)
Construction profits
35%
Depreciation
35%
Totals
$(5,600)
(c) Income Tax Expense ……………………………………….. 88,200
Deferred Tax Asset …………………………..……………… 5,600
Deferred Tax Liability ………………………………… 34,650
Income Taxes Payable ………………………………. 59,150
PROBLEM 19-9B (Continued)
Deferred tax asset at the end of 2015 ……………………………… $ 5,600
Deferred tax asset at the beginning of 2015 ……………………. 0
Deferred tax benefit for 2015 ………………………………………….. $ (5,600)