Exercise 19-17 Crane Co. establishes a $110,000,000 liability at the end of 2017
ID: 342041 • Letter: E
Question
Exercise 19-17
Crane Co. establishes a $110,000,000 liability at the end of 2017 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2018. Also, at the end of 2017, the company has $55,000,000 of temporary differences due to excess depreciation for tax purposes, $7,700,000 of which will reverse in 2018.
The enacted tax rate for all years is 40%, and the company pays taxes of $70,400,000 on $176,000,000 of taxable income in 2017. Crane expects to have taxable income in 2018.
Determine the deferred taxes to be reported at the end of 2017.
Deferred tax assets
$
Deferred tax liabilities
$
SHOW LIST OF ACCOUNTS
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Indicate how the deferred taxes computed above are to be reported on the balance sheet.
Crane Co.
Balance Sheet
December 31, 2017
For the Year Ended December 31, 2017
For the Quarter Ended December 31, 2017
Current Assets
Current Liabilities
Intangible Assets
Long-term Investments
Non-current Asset
Non-current Liabilities
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Current Liabilities
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
SHOW LIST OF ACCOUNTS
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Assuming that the only deferred tax account at the beginning of 2017 was a deferred tax liability of $11,000,000, draft the income tax expense portion of the income statement for 2017, beginning with the line “Income before income taxes.” (Hint: You must first compute (1) the amount of temporary difference underlying the beginning $11,000,000 deferred tax liability, then (2) the amount of temporary differences originating or reversing during the year, and then (3) the amount of pretax financial income.)
Crane Co.
Income Statement (Partial)
December 31, 2017
For the Year Ended December 31, 2017
For the Quarter Ended December 31, 2017
Current
Deferred
Dividends
Expenses
Income before Income Taxes
Income Tax Expense
Net Income / (Loss)
Retained Earnings, January 1
Retained Earnings, December 31
Revenues
Total Expenses
Total Revenues
$
Current
Deferred
Dividends
Expenses
Income before Income Taxes
Income Tax Expense
Net Income / (Loss)
Retained Earnings, January 1
Retained Earnings, December 31
Revenues
Total Expenses
Total Revenues
Current
Deferred
Dividends
Expenses
Income before Income Taxes
Income Tax Expense
Net Income / (Loss)
Retained Earnings, January 1
Retained Earnings, December 31
Revenues
Total Expenses
Total Revenues
$
Current
Deferred
Dividends
Expenses
Income before Income Taxes
Income Tax Expense
Net Income / (Loss)
Retained Earnings, January 1
Retained Earnings, December 31
Revenues
Total Expenses
Total Revenues
Current
Deferred
Dividends
Expenses
Income before Income Taxes
Income Tax Expense
Net Income / (Loss)
Retained Earnings, January 1
Retained Earnings, December 31
Revenues
Total Expenses
Total Revenues
$
Explanation / Answer
Deferred tax assets= 44000000 (110000000*40%)
Deferred tax liability = 22000000 (55000000*40%)
93500000
(176000000-82500000)
33000000
(82500000*40%)
Crane Co. Balance sheet December 31, 2017 Non-current Asset Deferred tax 22000000Related Questions
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