Question

At December 31, DePaul Corporation had a $22 million balance in its deferred tax asset account and a $128 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:

1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $220 million: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $100 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Rent revenue collected in advance, $40 million; taxable in the year collected; recorded as income when the performance obligation is satisfied in the following year.

Required:
Assuming DePaul will show a single noncurrent net amount in its December 31 balance sheet, indicate that amount and whether it is a net deferred tax asset or liability. The tax rate is 40%.
Determine the deferred tax amounts to be reported in the December 31 balance sheet. The tax rate is 40%. (Enter your answers in millions.)

Answer 1