Gradebook ORION Downloadable eTextbeok AL ALUBUNTING (ACCT 221//312/313 ent Exer
ID: 2543055 • Letter: G
Question
Gradebook ORION Downloadable eTextbeok AL ALUBUNTING (ACCT 221//312/313 ent Exercise 19-20 The differences between the book basis and tax basis of the asset and liabilities of Buffalo Corporation at the end of 2016 are presented below. Book Basis Tax Basis Accounts receivable $49,300 32,100 $0 Litigation iability It is estimated that the litigation liability will be settled in 2017. The difference in taxable income of $317,000 in 2016 and is expected to have taxable income in each of the following 2 years. Its enacted tax rate is 34% for at rears. Thisis necongany's first year of operations. The operating cyde of the business is 2 years. accounts receivable will resut in taxable amounts of $30,100 in 2017 and $19,200 in 2018. The company has Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (re account tities are automatically indented when omount is entered. Do not indent manually. If no entry is required, select "No Entry for the account bitles and eiter (o for the amounts) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS All Rights Reserved. A Divisioe of 1shne5s IsExplanation / Answer
1) Calculation of Deferred tax asset and deferred tax liability (Amt in $)
Deferred tax expense for 2016 = DTL at the end of 2016 - DTL at the beginning of 2016
= $16,762 - $0 = $16,762
Deferred tax benefit for 2016 = DTA at the end of 2016 - DTA at the beginning of 2016
= $10,914 - $0 = $10,914
Income Tax payable = Taxable Income*Tax rate
= $317,000*34% = $107,780
Journal Entry (Amounts in $)
2) Deferred Tax Asset is current because the related liability is also current. Thus Deferred Tax Asset will be shown under Current Assets in the Balance Sheet. Deferred tax liability is also current because related accounts receivable is classified as current asset. It is shown as follows:-
Buffalo Corporation
Balance Sheet for the year ended 2016
Current Assets
Deferred Tax Asset $10,914
Current liabilities
Deferred Tax Liability $16,762
Temporary Difference Future Taxable (Deductible) Amounts (A) Tax rate (B) Deferred Tax Asset (A*B) Deferred Tax Liability (A*B) Accounts Receivable 49,300 34% 16,762 Litigation Liability (32,100) 34% (10,914) Totals 17,200 (10,914) 16,762Related Questions
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