Nadal Inc. had two temporary differences at the end of 2013. The first differenc
ID: 2447696 • Letter: N
Question
Nadal Inc. had two temporary differences at the end of 2013. The first difference stems from installment sales, and the second one results from the accrual of a loss contingency. Nadal's accounting department has developed a schedule of future taxable and deductible amounts related to these temporary differences as follows:
Taxable amounts:
2014: $40,000
2015: $50,000
2016: $60,000
2017: $80,000
Deductible Amounts:
2014: $0
2015: $(15,000)
2016: $(19,000)
2017: $0
As of the beginning of 2013, the enacted tax rate is 34% for 2013 and 2014, and 38% for 2015-2018. At the beginning of 2013, the company had no deferred income taxes on its balance sheet. Taxable income is expected in all future years.
Instructions:
A. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2013.
B. Indicate how deferred income taxes would be classified on the balance sheet at the end of 2013.
Explanation / Answer
Deferred tax liabillity 72,880
To income tax provision 72,880
This would be shown as deferred tax liability under the long term liabilities head with amount of $ 72,880
Taxable amounts deductible amount Taxable amount 2014 40,000 - 40,000 34% 13,600 2015 50,000 (15,000) 35,000 38% 13,300 2016 60,000 (19,000) 41,000 38% 15,580 2017 80,000 - 80,000 38% 30,400 Deferred tax liability 72,880Related Questions
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