Exercise 19-20 Book Basis Tax Basis B) Indicate how deferred income taxes will b
ID: 2543576 • Letter: E
Question
Exercise 19-20
Book Basis
Tax Basis
B) Indicate how deferred income taxes will be reported on the balance sheet at the end of 2016.
Exercise 19-20
The differences between the book basis and tax basis of the assets and liabilities of Buffalo Corporation at the end of 2016 are presented below.Book Basis
Tax Basis
Accounts receivable $49,300 $0 Litigation liability 32,100 0It is estimated that the litigation liability will be settled in 2017. The difference in accounts receivable will result in taxable amounts of $30,100 in 2017 and $19,200 in 2018. The company has 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 all years. This is the company’s first year of operations. The operating cycle of the business is 2 years.
Explanation / Answer
A) Journal Entries:
Recording income tax payable based on taxable income:
Recording deferred tax expense / liability for difference in tax basis & book basis in respect of accounts receivable:
Recording deferred tax income / asset for difference in tax basis & book basis in respect of litigation liabilities:
Total tax expense = 107,780+16,762-10,914=113,628
B) Reporting of deferred income tax on the balance sheet
Income tax expense Dr 107780 Income tax payable Cr 107780Related Questions
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