Four independent situations are described below. Each involves future deductible

Question

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) Situation 1 2 3 4 Taxable income $ 113 $ 271 $ 265 $344 Future deductible amounts 22 27 27 Future taxable amounts 22 22 44 Balance(s) at beginning of the year: Deferred tax asset 3.4 16 6.8 Deferred tax liability 3.4 3.4 The enacted tax rate is 40%. Required: For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2).)

Explanation / Answer

Particulars 1 2 3 4 Taxable Income 113 271 265 344 Tax @ 0.40 40% 40% 40% 40% Income tax payable 45.2 108.4 106 137.6 Future Deductible amounts -22 -27 -27 Tax rate @40% 40% 40% 40% 40% Deferred tax asset- bal -8.8 -10.8 -10.8 Beginning of the year 3.4 16 6.8 Deferred Tax asset (dr)Cr -5.4 5.2 -4 Future taxable amounts 22 22 44 Tax rate @40% 40% 40% 40% 40% Deferred tax liability balance 0 8.8 8.8 17.6 Beginning of the year 3.4 3.4 Differred tax liability(dr) Cr 0 5.4 5.4 17.6 Income tax payable currently 45.2 108.4 106 137.6 Deferred Tax asset (dr)Cr -5.4 0 5.2 -4 Differred tax liability(dr) Cr 0 5.4 5.4 17.6 Income tax expense 39.8 113.8 116.6 151.2

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