Problem 19-6 Presented below are two independent situations related to future ta
ID: 2538622 • Letter: P
Question
Problem 19-6
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2017.
1. Tamarisk Co. has developed the following schedule of future taxable and deductible amounts.
2018
2019
2020
2021
2022
2. Vaughn Co. has the following schedule of future taxable and deductible amounts.
2018
2019
2020
2021
Both Tamarisk Co. and Vaughn Co. have taxable income of $4,800 in 2017 and expect to have taxable income in all future years. The tax rates enacted as of the beginning of 2017 are 30% for 2017–2020 and 35% for years thereafter. All of the underlying temporary differences relate to noncurrent assets and liabilities.
1. Compute the net amount of deferred income taxes to be reported at the end of 2017, and indicate how it should be classified on the balance sheet for situation one.
2. Compute the net amount of deferred income taxes to be reported at the end of 2017, and indicate how it should be classified on the balance sheet for situation two.
2018
2019
2020
2021
2022
Taxable amounts $400 $400 $400 $400 $400 Deductible amount — — — (2,500 )Explanation / Answer
1. Tamarisk Co.
Deferred tax
Temporaty Difference
Future taxable (deductible) amounts
Tax rate
Asset
Liability
2018
400
30%
120
2019
400
30%
120
2020
400
30%
120
2021
400
35%
140
2021
(2,500)
35%
(875)
2022
400
35%
140
Total
(875)
640
Deferred tax asset (Non current asset) = 875 - 640 = $235
2. Vaughn Co.
Deferred tax
Temporaty Difference
Future taxable (deductible) amounts
Tax rate
Asset
Liability
2018
400
30%
120
2019
400
30%
120
2020
400
30%
120
2020
(2,800)
30%
(840)
2021
400
35%
140
Total
(840)
500
Deferred tax asset (Non current asset) = 840 - 500 = $240
Deferred tax
Temporaty Difference
Future taxable (deductible) amounts
Tax rate
Asset
Liability
2018
400
30%
120
2019
400
30%
120
2020
400
30%
120
2021
400
35%
140
2021
(2,500)
35%
(875)
2022
400
35%
140
Total
(875)
640