The total of Temporary differences for the year ending 31st December, 2016 is $432,000.
Difference creating DTL:
Excess of Tax Depreciation (DTL because results in Higher Tax
Liability in future years due to lower future tax depreciation) =
$205,000.
Sale of Installment (Installment Method for Income Tax would result in Higher Tax income in future years, therefore DTL created) =$257,000.
Total DTL = $462,000 * 40% = $184,800.
Difference creating DTA:
Estimated loss contingency (Considered for tax purposes when
actually paid thereby reducing future tax income. Hence DTA
created) = $30,000 * 40% = 12,000.
Note: Future Tax rate is 40%, given in question,
Income Tax Expense (Deferred) = DTL - DTA = $184,800 - $12,000 = $172,000.
Presentation of DTL:
Sunland Company Balance Sheet:
Total Current Liabilities
Deferred Tax Liability (Net) = $172,000
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