Four independent situations are described below. Each involves
future deductible amounts and/or future taxable amounts produced by
temporary differences:
($ in thousands) | ||||||||||||||||
Situation | ||||||||||||||||
1 | 2 | 3 | 4 | |||||||||||||
Taxable income | $ | 84 | $ | 216 | $ | 196 | $ | 260 | ||||||||
Future deductible amounts | 16 | 20 | 20 | |||||||||||||
Future taxable amounts | 16 | 16 | 28 | |||||||||||||
Balance(s) at beginning of the year: | ||||||||||||||||
Deferred tax asset | 2 | 9 | 4 | |||||||||||||
Deferred tax liability | 8 | 2 | ||||||||||||||
The enacted tax rate is 25%.
Required:
For each situation, determine the following: (Enter your
answers in thousands (i.e., 55,000 should be entered as 55).
Negative amounts should be indicated by a minus sign. Leave no cell
blank, enter "0" wherever applicable.)
Situation ( $ in thousands ) | |||||
1 | 2 | 3 | 4 | ||
A) | Income tax payable (Note 1 ) | $ 21 | $ 54 | $ 49 | $ 65 |
B) | Deferred Tax Asset- Balance (Note 2) | $ 4 | $ 5 | $ 5 | |
C) | Deferred Tax Asset- Change (Note 3) | $ 2 | - $4 | $ 1 | |
D) | Deferred Tax Liability- Balance (Note 4) | $ 4 | $ 4 | $ 7 | |
E) | Deferred Tax Liability- Change (Note 5 ) | -$4 | $ 2 | $ 7 | |
F) | Income Tax Expense (Note 6) | $ 19 | $ 50 | $ 55 | $ 71 |
Explanation : | |||||
Notes : | |||||
Situation ( $ in thousands ) | |||||
1 | 2 | 3 | 4 | ||
1) | Income tax payable = Taxable income * Tax rate | $ 21 | $ 54 | $ 49 | $ 65 |
($ 84 *25%) | ($ 216*25%) | ($ 196*25% ) | ($ 260*25%) | ||
2) | Deferred Tax asset-Balance= Future deductible amounts * tax rate | $ 4 | $ 5 | $ 5 | |
($ 16*25%) | ($ 20*25%) | ($ 20*25%) | |||
3) | Deferred Tax asset-Change= Deferred Tax asset-Balance - Deferred | $ 2 | - $4 | $ 1 | |
Tax asset at the beginning of the year | ($ 4- $ 2) | ($ 5- $ 9 ) | ($ 5- $ 4 ) | ||
4) | Deferred Tax Liability-Balance= Future Taxable amounts * tax rate | $ 4 | $ 4 | $ 7 | |
($ 16*25%) | ($ 16*25%) | ($ 28*25%) | |||
5) | Deferred Tax Liability-Change= Deferred Tax Liability-Balance - Deferred | - $4 | $ 2 | $ 7 | |
Tax Liability at the beginning of the year | ($ 4 - $ 8 ) | ($ 4- $ 2) | ($ 7- $0 ) | ||
6) | Income tax expense = (Income tax payable + Deferred tax | $ 19 | $ 50 | $ 55 | $ 71 |
Liability -Change) - (Deferred Tax asset -Change ) | {($ 21+0)-$ 2 )} | {($ 54- $ 4) -$ 0) } | {($ 49+$ 2)-(- $ 4))} | {($65+$ 7)-($ 1)} |
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