In: Accounting
At December 31, 2016, Belmont Company had a net deferred
tax
liability of $375,000. An explanation of the items that compose
this balance is as follows.
Resulting Balances
Temporary Differences 1. Excess of tax depreciation over book depreciation |
in Deferred Taxes $200,000 |
2. Accrual, for book purposes, of estimated loss contingency
from pending
lawsuit that is expected to be settled in 2017. The loss will be
deducted on
the tax return when paid. 3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. |
(50,000) |
225,000 $375,000 |
In analyzing the temporary differences, you find that $30,000 of
the depreciation temporary difference will reverse in 2017,
and
$120,000 of the temporary difference due to the installment sale
will reverse in 2017. The tax rate for all years is 40%.
Instructions
Indicate the manner in which deferred taxes should be presented on
Belmont Company’s December 31, 2016, balance sheet
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AS FOR GIVEN DATA..
At December 31, 2016, Belmont Company had a net deferred
tax
liability of $375,000. An explanation of the items that compose
this balance is as follows.
Resulting Balances
Temporary Differences 1. Excess of tax depreciation over book depreciation |
in Deferred Taxes $200,000 |
2. Accrual, for book purposes, of estimated loss contingency
from pending
lawsuit that is expected to be settled in 2017. The loss will be
deducted on
the tax return when paid. 3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. |
(50,000) |
225,000 $375,000 |
In analyzing the temporary differences, you find that $30,000 of
the depreciation temporary difference will reverse in 2017,
and
$120,000 of the temporary difference due to the installment sale
will reverse in 2017. The tax rate for all years is 40%.
Instructions
Indicate the manner in which deferred taxes should be presented on
Belmont Company’s December 31, 2016, balance sheet
EXPLANATION ::-
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