At December 31, 2016, Larkspur Company had a net deferred tax liability of $369,

Question

At December 31, 2016, Larkspur Company had a net deferred tax liability of $369,000. An explanation of the items that compose this balance is as follows.

In analyzing the temporary differences, you find that $31,600 of the depreciation temporary difference will reverse in 2017, and $127,300 of the temporary difference due to the installment sale will reverse in 2017. The tax rate for all years is 40%.

Indicate the manner in which deferred taxes should be presented on Larkspur Company’s December 31, 2016, balance sheet.

Exercise 1 At Decembar 31, 2016, Larkspur Company had a net defarred tax liahility of $369,0D. An explanation of the items that compose this balance is as follows 9-9 t deferred tax of s3690 Resulting Balances Temporary D 1. Excess of tax depreciation over book depreciation 2 Accrual, for book purposes, of estimated loss contingency from pending $217,400 x d to be settled in 20 lawsuit that is expactad to be settled in 2017. The loss will be deducted on the tax return when paid Acrual method used for baok purpases and installment method used for tax purposes far an isolated installment sala of an investment. (52,900) 204,500 $369,000 in anal ing the temporary differences you nd that $31,600 of tha dep e at on tempo a difference will reverse in 2017, and S127 3000 the tem a difference due to the installment sale ill eve 20 7. The tax atem ? ndicate the manne in which de erred taxes should be presented on Larkspur Comcany's Decembe 31, 2016, balance a years is 20% sheet Balance Sheet

Explanation / Answer

Larkspur's company

Balance sheet

December 31, 2016

Current assets Deferred tax asset (52900-(127300*40%)) 1980 Long-term liability Deferred tax liability (217400-(204500-(127300*40%))) 370980

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