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At the end of year 6, the tax effects of temporary differences reported in Turtle company's...

At the end of year 6, the tax effects of temporary differences reported in Turtle company's year-end financial statements were as follows:

 Deferred Tax Assets (Liabilities)Accelerated tax depreciation  ($120,000)Warranty expense     80,000NOL carryforward   200,000Total$ 160,000

A valuation allowance was not considered necessary. Turtle anticipates that $40,000 of the deferred tax liability will reverse in year 7, that actual warranty costs will be incurred evenly in year 8 and year 9, and that the NOL carryforward will be used in year 7. On Turtle's December 31, year 6 balance sheet, what amount should be reported as a deferred tax asset under U.S. GAAP?

a.

$240,000

b.

$280,000

c.

$160,000

d.

$200,000

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Answer #1

All the temporary differences provided in the question have the effect of getting reversed in the future tax periods.

Hence the amount of $ 160,000 provided as Deferred tax Asset should be reported as Net Deferred tax asset in the Balance sheet under U.S.GAAP.

The answer is Option C..

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