Question

Use the following information for questions 10 – 12. The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars): Pretax accounting income: $200 Pretax accounting income included: Fines for overweight trucks (never deductible for tax purposes) 5 Depreciation expense 70 Depreciation in the tax return using MACRS: 110 The applicable tax rate is 40%. There are no other temporary or permanent differences. 10. Franklin’s balance sheet at the end of its first year of operations should report: Answer is A deferred tax liability of $16 among its noncurrent liabilities.    11. Franklin’s net income (in millions) for its first year is: Answer is $118.

I have you the answers for both of them but I don't is how are they getting the answers. Please show your steps to how to get those answers.

Answer 1

		Anount$	Anount$
	Pre Tax Income		200
Add:	Overweight fines		5
Less:	Depreciation Net of
	Depreciation expense MACRS	110
	Depreciation expense(Normal)	70	40
	Income before tax but after adjustment		165
	Tax rate 40%
	Deferred tax liability ($110-$70)*40%	16
	Income tax payable($165-$40)*40%	50	66
	Post tax Income		99
	Reported Income On Balance sheet(99+16)		$115
Overweight fine has to be added back as it is not deductible for tax purposes

Deferred tax liability is $16 =($110-$70)*40% &it is shown as noncurrent liabilities.