Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 2, Problem 16PC
REQUIRED
- a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwards. (Net operating loss carryforwards [also referred to as tax loss carryforwards] are amounts reported as taxable losses on tax filings. Because the tax authorities generally do not “pay” corporations for incurring losses, companies are allowed to “carry forward” taxable losses to future years to offset taxable income. These future tax benefits give rise to deferred tax assets.) As of the end of 2008, what is the dollar amount of the company’s net operating loss carryforwards? What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? Describe how these two amounts are related.
- b. Biosante has gross deferred tax assets of $28,946,363. However, the net deferred tax assets balance is zero. Explain.
- c. The valuation allowance for the deferred tax asset increased from $21,818,084 to $28,946,363 between 2007 and 2008. How did this change affect the company's net income?
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Cinnamon, Inc. recorded a total deferred tax asset in 2007 of $12,301, off set by a $12,301valuation allowance. Cinnamon most likely :A . fully utilized the deferred tax asset in 2007.B . has an equal amount of deferred tax assets and deferred tax liabilities.C . expects not to earn any taxable income before the deferred tax asset expires.
Crystal Critters, Inc., a U.S. GAAP reporter, has the deferred tax assets and liabilities presented below:
Item
Classification on the Balance Sheet of Related Account
Deferred Tax Associated with Item
Excess of warranty expense over warranty deductions
Current
$74,000 Asset
Accelerated depreciation for tax purposes
Noncurrent
$84,000 Liability
Installment sales receivable
Current
$44,000 Liability
Contingent liability
Current
$34,000 Asset
Assuming it meets the conditions to net assets and liabilities, how will the company report deferred taxes on the balance sheet?
Group of answer choices
current asset: deferred tax asset $108,000; noncurrent liability: deferred tax liability $128,000
noncurrent liability: deferred tax liability $20,000
current liability: deferred tax liability $64,000; noncurrent liability: deferred tax liability $84,000
current liability: deferred tax liability $44,000; noncurrent asset: deferred tax asset $84,000
Tetra Corp, an IFRS reporter, has the deferred tax assets and liabilities presented below:
Item
Classification on the Balance Sheet of Related Account
Deferred Tax Associated with Item
Excess of warranty expense over warranty deductions
Current
$69,000 Asset
Accelerated depreciation for tax purposes
Noncurrent
$79,000 Liability
Installment sales receivable
Current
$39,000 Liability
Contingent liability
Current
$29,000 Asset
What will the company report for deferred taxes on the balance sheet?
Group of answer choices
noncurrent assets: deferred tax asset $20,000
noncurrent liabilities: deferred tax liability $20,000
current assets: deferred tax asset $59,000; noncurrent liabilities: deferred tax liability $79,000
Companies do not report deferred taxes on the balance sheet under IFRS.
Chapter 2 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 2 - Prob. 1QECh. 2 - Asset Valuation and Income Recognition. Asset...Ch. 2 - Trade-Offs among Acceptable Accounting...Ch. 2 - Income Flows versus Cash Flows. The text states,...Ch. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Computation of Income Tax Expense. A firms income...Ch. 2 - Computation of Income Tax Expense. A firms income...
Ch. 2 - Costs to Be Included in Historical Cost Valuation....Ch. 2 - Effect of Valuation Method for Nonmonetary Asset...Ch. 2 - Prob. 13PCCh. 2 - Prob. 14PCCh. 2 - Prob. 15PCCh. 2 - Deferred Tax Assets. Components of the deferred...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Interpreting Income Tax Disclosures. Prepaid Legal...Ch. 2 - Interpreting Income Tax Disclosures. The financial...Ch. 2 - Analyzing Transactions. Using the analytical...Ch. 2 - Prob. 21PCCh. 2 - Starbucks The financial statements of Starbucks...Ch. 2 - Prob. 1BICCh. 2 - Prob. 1CICCh. 2 - Prob. 1DICCh. 2 - Prob. 1EICCh. 2 - Prob. 1FICCh. 2 - Starbucks The financial statements of Starbucks...
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