Question

# Problem 19-06 Presented below are two independent situations related to future taxable and deductible amounts resulting...

Problem 19-06

Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2020.

1. Carla Co. has developed the following schedule of future taxable and deductible amounts.

 2021 2022 2023 2024 2025 Taxable amounts \$200 \$200 \$200 \$200 \$200 Deductible amount — — — (1,900 )

2. Sarasota Co. has the following schedule of future taxable and deductible amounts.

 2021 2022 2023 2024 Taxable amounts \$200 \$200 \$200 \$200 Deductible amount — — (2,200 ) —

Both Carla Co. and Sarasota Co. have taxable income of \$3,700 in 2020 and expect to have taxable income in all future years. The tax rates enacted as of the beginning of 2020 are 30% for 2020–2023 and 35% for years thereafter. All of the underlying temporary differences relate to noncurrent assets and liabilities.

1. Compute the net amount of deferred income taxes to be reported at the end of 2020, and indicate how it should be classified on the balance sheet for situation one.

 Deferred income taxes to be reported at the end of 2020 in Carla Co. \$

Create partial balance sheet

2. Compute the net amount of deferred income taxes to be reported at the end of 2020, and indicate how it should be classified on the balance sheet for situation two.

 Deferred income taxes to be reported at the end of 2020 in Sarasota co. \$

Create partial balance sheet

#### Homework Answers

Answer #1

Part 1)

 Temporary Difference Future Taxable (Deductible Amounts) Tax Rate Deferred Tax (Asset) Liability 2021 200 30% 60 2022 200 30% 60 2023 200 30% 60 2024 200 35% 70 2024 -1900 35% -665 2025 200 35% 70 Total -\$665 \$320

Deferred income taxes to be reported at the end of 2020 in carla Co. = \$345 (665 - 320)

 carla Company Balance Sheet December 31, 2020 Other assets (noncurrent) Deferred tax asset \$345

Part 2)

 Temporary Difference Future Taxable (Deductible Amounts) Tax Rate Deferred Tax (Asset) Liability 2021 200 30% 60 2022 200 30% 60 2023 200 30% 60 2023 -2200 30% -660 2024 200 35% 70 Total -\$660 \$250

Deferred income taxes to be reported at the end of 2020 in Sarasota Co. = \$410 (660-250)

 Sarasota Company Balance Sheet December 31, 2020 Other assets (noncurrent) Deferred tax asset \$410
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