Question

At December 31, DePaul Corporation had a $9 million balance in its deferred tax asset account and a $63 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences: Estimated warranty expense, $10 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty). Depreciation expense, $160 million: straight-line in the income statement; MACRS on the tax return. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years. Rent revenue collected in advance, $20 million; taxable in the year collected; recorded as income when the performance obligation is satisfied in the following year. Required: Assuming DePaul will show a single noncurrent net amount in its December 31 balance sheet, indicate that amount and whether it is a net deferred tax asset or liability. The tax rate is 30%. Determine the deferred tax amounts to be reported in the December 31 balance sheet. The tax rate is 30%

Answer 1

	Temporary Difference	Deductible/Taxable difference	Deferred Tax Asset /Liability	% Tax	Amt of temporary difference	Deferred Tax/liability Amt	Current /Long term
1	Estimated warranty expense	Deductible	Deferred Tax Asset	30%	10,000,000	3,000,000	Current Asset
2	Depreciation expense	Taxable	Deferred Tax liability	30%	160,000,000	48,000,000	Long term liability
3	Installment sale of properties	Taxable	Deferred Tax liability	30%	50,000,000	15,000,000	Long term liability
4	Rent revenue collected in advance	Deductible	Deferred Tax Asset	30%	20,000,000	6,000,000	Current Asset
	Balance sheet Amounts Dec 31.	Amt $
	Deferred Tax Asset-Current Asset	$ 9,000,000
	Deferred Tax Liability-Long term liability	$       63,000,000