Question

E. 19.14a anyone know how to calc?

Novotna inc's only temporary diff at the beginning and end of 2019 is caused by a $3 million deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only 1/2 of which is classified as a current asset) is due to equal installments in 2020 and 2021. The related deferred tax liab at the beginning of the year is $900K. In the 3rd qtr. of 2019, a new tax rate of 20% is enacted. into law and is scheduled to become effective for 2021. Taxable income for 2019 is $5M, and taxable income is expected in all future years.

Q. determine the amt reported as deferred tax liab at the end of 2019. indicate proper classification.  

Answer 1

Future years 2020 $ 1,500,000 30% $ 450,000 $ Future taxble(deductible) amounts Tax rate Deferred tax liability(asset) 3,000,000 2021 Total 1,500,000 $ 20% 300,000 $ $ 750,000 The prior tax rate of 30%is computed by dividing the $900,000 balance of the deferred tax laibility account as on jan 1,16, by $3 million cumulative temporary difference at the same date. 11 Resulting deferred tax (Asset) liability Related balance sheet Account Classification Installment receivable $ 450,000 Current Installment receivable $ 300,000 Non current One Half of the installment receivable is classified as a current asset and one half is classified as non-current. Therefore, the deferred tax liability related to the portion of the receivable that is due in 2020 is trated as current liability and the balance portion that is due in 2021 is classifed as non current libility.