Question

41. LO.2 Kantner, Inc., is a domestic corporation with the following balance sheet for mine Kantner's net Federal deferred tax asset or net Assume a 21 % Federal corporate tax rate and no valuation allowance. book and tax purposes at the end of the year. Based on this information, deter- deferred tax liability at year-end Tax Debit/ Book Debit/ (Credit) (Credit) Assets S 1,000 Cash Accounts receivable $ 1,000 9,000 9,000 Buildings Accumulated depreciation Furniture & fixtures Accumulated depreciation 850,000 850,000 (700,000) (620,000) 40,000 40,000 (10,000) (8,000) Total assets $190,000 $272,000 Liabilities Accrued warranty expense Note payable ($ 40,000) (16,000) S -0- (16,000) Total liabilities Stockholders' Equity Paid-in capital Retained earnings Total liabilities and stockholders' equity (S 16,000) (S 56,000) (S50,000) ($50,000) (124,000) (166,000) ($190,000) ($272,000) 42LO.2 Based on the facts and results of Problem 41 and the beginning-of- the-year book-tax basis difference listed below, determine the change in Kantner's deferred tax assets for the current year Beginning of Year Accrued warranty expense $30,000 Subtotal $30,000 Applicable tax rate Gross deferred tax asset x 21% $ 6,300 43 LO.2 Based on the facts and results of Problem 41 and the beginning-of- the-year book-tax basis differences listed below, determine the change in Kantner's deferred tax liabilities for the current year Beginning of Year ing-accumulated depreciation ure&fixtures-accumulated depreciation stal Dcable tax rate ($62,000) (400) ($62,400) 21% X deferred tax liability ($13,104)

problem 43

Answer 1

Kanter's Deferred Tax Liabilities for the current year :

Buildings Accumulated Depreciation difference as per books and tax laws : ($80000) (620000-700000)

Furniture & Fixtures accu. depreciation diff. as per books and as per tax laws: ( 0 ) (40000-40000)

Total----------------------------------------------------------------------------------------------: ($80000)

Closing balance of Deferred Tax Liability at Applicable tax rate (21%) is $80000*21% = 16800

Opening balance of Deferred Tax Liability at Applicable tax rate (21%) is $62400*21% = 13104

Difference to be recognised in the current financial year as deferred tax expense is = $3696 (16800-13104)