At December 31, 2019, Sunland Company had a net deferred tax liability of $361,200. An explanation of the items that compose this balance is as follows. Temporary Differences Resulting Balancesin Deferred Taxes1. Excess of tax depreciation over book depreciation $186,400 2. Accrual, for book purposes, of estimated loss contingency frompending lawsuit that is expected to be settled in 2020. The losswill be deducted on the tax return when paid. (52,000)3. Accrual method used for book purposes and installment methodused for tax purposes for an isolated installment sale of an investment. 226,800 $361,200 In analyzing the temporary differences, you find that $29,100 of the depreciation temporary difference will reverse in 2020, and $127,800 of the temporary difference due to the installment sale will reverse in 2020. The tax rate for all years is 20%. Indicate the manner in which deferred taxes should be presented on Sunland Company’s December 31, 2019, balance sheet.
At December 31, 2019, Sunland Company had a net
Temporary Differences
Resulting Balances
in
1.
Excess of tax
$186,400
2.
Accrual, for book purposes, of estimated loss contingency from
pending lawsuit that is expected to be settled in 2020. The loss
will be deducted on the tax return when paid.
(52,000
)
3.
Accrual method used for book purposes and installment method
used for tax purposes for an isolated installment sale of an investment.
226,800
$361,200
In analyzing the temporary differences, you find that $29,100 of the depreciation temporary difference will reverse in 2020, and $127,800 of the temporary difference due to the installment sale will reverse in 2020. The tax rate for all years is 20%.
Indicate the manner in which deferred taxes should be presented on Sunland Company’s December 31, 2019, balance sheet.
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