Question

Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020.

1. Pearl Co. has developed the following schedule of future taxable and deductible amounts.

		2021		2022		2023		2024			2025
Taxable amounts		$200		$200		$200		$200			$200
Deductible amount		—		—		—		(1,700	)

2. Martinez Co. has the following schedule of future taxable and deductible amounts.

		2021		2022		2023			2024
Taxable amounts		$200		$200		$200			$200
Deductible amount		—		—		(1,800	)		—

Both Pearl Co. and Martinez Co. have taxable income of $3,600 in 2020 and expect to have taxable income in all future years. The tax rates enacted as of the beginning of 2020 are 30% for 2020–2023 and 35% for years thereafter. All of the underlying temporary differences relate to noncurrent assets and liabilities.

1. Compute the net amount of deferred income taxes to be reported at the end of 2020, and indicate how it should be classified on the balance sheet for situation one.

Deferred income taxes to be reported at the end of 2020 in Pearl Co.

$

Deferred income taxes to be reported at the end of 2020 in Martinez co.

$

2. Compute the net amount of deferred income taxes to be reported at the end of 2020, and indicate how it should be classified on the balance sheet for situation two.

Answer 1