Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) _____ Situation________ 1 2 3 4 Taxable income $100 $232 $228 $308 Future deductible amounts 16 20 20 Future taxable amounts 16 16 44 Balance (s) at beginning of the year: Deferred tax asset 2 13 4 Deferred tax liability 8 2 The enacted tax rate is 25% Required: For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter “O” Wherever applicable.) _____________ Situation__________________ 1 2 3 4 A Income tax payable currently. ____ ____ ____ ____ B Deferred tax asset—ending balance. _____ _____ _____ _____ C Deferred tax asset---change. _____ _____ ______ ______ D Deferred tax liability—ending balance. _____ ______ ______ _____ E Deferred tax liability---- change. _____ ______ ______ ______ F Income tax expense. _____ ______ ______ ______

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) _ Situation 1 2 3 4 Taxable income $100 $232 $228 $308 Future deductible amounts 16 20 20 Future taxable amounts 16 16 44 Balance (s) at beginning of the year: Deferred tax asset 2 13 4 Deferred tax liability 8 2 The enacted tax rate is 25% Required: For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter “O” Wherever applicable.) _ Situation________ 1 2 3 4 A Income tax payable currently. B Deferred tax asset—ending balance. _ _ _ _ C Deferred tax asset---change. _ _ D Deferred tax liability—ending balance. _ _ E Deferred tax liability---- change. _ __ F Income tax expense. _ ____

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter14: Taxes On The Financial Statements

Section: Chapter Questions

Problem 36P

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Question

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

($ in thousands)

_____ Situation________

1 2 3 4

Taxable income $100 $232 $228 $308

Future deductible amounts 16 20 20

Future taxable amounts 16 16 44

Balance (s) at beginning of the year:

Deferred tax asset 2 13 4

Deferred tax liability 8 2

The enacted tax rate is 25%

Required:

For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter “O” Wherever applicable.)

_____________ Situation__________________

1 2 3 4

A Income tax payable currently. ____ ____ ____ ____

B Deferred tax asset—ending balance. _____ _____ _____ _____

C Deferred tax asset---change. _____ _____ ______ ______

D Deferred tax liability—ending balance. _____ ______ ______ _____

E Deferred tax liability---- change. _____ ______ ______ ______

F Income tax expense. _____ ______ ______ ______

Expert Solution

Step 1

The deferred tax liability arises when there is a line item in the balance sheet on which income taxes are not required to be paid now but will be paid in the future. The cash flows for tax are lower in the current period because some portion of taxes is paid in the future.

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