Question

Chapter 03 Homework

1. DRILL.book-tax.differences
2. DRILL.GAAP.principles
3. DRILL.deferred.tax.asset
4. KEYTERMS.03-01.Part3
5. PR.03-10
6. PR.03-12
7. PR.03-13
8. PR.03-38
9. PR.03-39
10. PR.03-40
11. PR.03-49

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   Problem 3-39 (LO. 2)

   Kantner, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Assume a 21% Federal corporate tax rate and no valuation allowance.

   Tax Debit/(Credit) Book Debit/(Credit) Assets Cash $1,000 $1,000 Accounts receivable 9,000 9,000 Buildings 850,000 850,000 Accumulated depreciation (700,000) (620,000) Furniture and fixtures 40,000 40,000 Accumulated depreciation (10,000) (8,000) Total assets $190,000 $272,000 Liabilities Accrued warranty expense $0 ($40,000) Note payable (16,000) (16,000) Total liabilities ($16,000) ($56,000) Stockholders' Equity Paid-in capital ($50,000) ($50,000) Retained earnings (124,000) (166,000) Total liabilities and stockholders' equity ($190,000) ($272,000)

   The beginning of the year book-tax basis difference for the deferred tax asset is listed below. Complete the table and determine the change in Kantner's deferred tax assets for the current year.

   Beginning of Year Current-Year Difference End of Year Accrued warranty expense $30,000 $ $ Applicable tax rate 21% 21% 21% Gross deferred tax asset $6,300 $ Change in deferred tax asset $

Answer 1

Beginning ofCurrent Year Difference 10,000 End of Year Year Accrued Warranty expense Applicable tax rate Gross Deferred tax Asset Change in Deferred tax asset $ $ 30,000 40,000 21% 21% 21% 6,300 $ 2,100 $ 8,400 2,100 (Increase)