Chapter 19: 11Q (page 1093)
How are deferred tax assets and deferred tax liabilities reported on the balance sheet?
An organization's assets and liabilities are two primary components for forming overall business operations. These both determine the actual value of the firm in the market.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Rode Inc. incurred a net operating loss of \(500,000 in 2017. Combined income for 2015 and 2016 was \)350,000. The tax rate for all years is 40%. Rode elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward.
Question: Access the glossary (“Master Glossary”) to answer the following.
(a) What is a deferred tax asset?
(b) What is taxable income?
(c) What is the definition of valuation allowance?
(d) What is a deferred tax liability?
(Deferred Taxes, Income Effects) Stephanie Delaney, CPA, is the newly hired director of corporate taxation for Acme Incorporated, which is a publicly traded corporation. Ms. Delaney’s first job with Acme was the review of the company’s accounting practices on deferred income taxes. In doing her review, she noted differences between tax and book depreciation methods that permitted Acme to realize a sizable deferred tax liability on its balance sheet. As a result, Acme paid very little in income taxes at that time.
Delaney also discovered that Acme has an explicit policy of selling off plant assets before they reversed in the deferred tax liability account. This policy, coupled with the rapid expansion of its plant asset base, allowed Acme to “defer” all income taxes payable for several years, even though it always has reported positive earnings and an increasing EPS. Delaney checked with the legal department and found the policy to be legal, but she’s uncomfortable with the ethics of it.
Instructions
Answer the following questions.
The amount of income taxes due to the government for a period of time is rarely the amount reported on the income statement for that period as income tax expense. (c) List the steps in the annual computation of deferred tax liabilities and assets.
Describe the procedure(s) involved in classifying deferred tax amounts on the statement of financial position under IFRS.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
