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Chapter 19: Q9IFRS (page 1114)

Youngman Corporation has temporary differences at December 31, 2017, that result in the following deferred taxes.

Deferred tax asset $24,000

Deferred tax liability 69,000

Indicate how these balances would be presented in Youngman鈥檚 December 31, 2017, statement of financial position.

Short Answer

Expert verified

Deferred tax liability of $45,000, will be reported under non-current liability on balance sheet.

Step by step solution

01

Meaning of Income-tax

Income tax is charge on the net income generated by the business, which is payable to the government authority.

02

Showing deferred tax liability in financial statements

Non-current liabilities

Deferred tax liability

$45,000

Working notes:

Calculation of deferred tax liability

Deferred鈥�tax鈥�=Deferred鈥�tax鈥�liability鈭�Deferred鈥�tax鈥�asset=$69,000鈭�$24,000=$45,000

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Most popular questions from this chapter

The differences between the book basis and tax basis of the assets and liabilities of Castle Corporation at the end of 2016 are presented below. Book Basis Tax Basis Accounts receivable \(50,000 \)鈥�0鈥� Litigation liability 30,000 鈥�0鈥� It is estimated that the litigation liability will be settled in 2017. The difference in accounts receivable will result in taxable amounts of \(30,000 in 2017 and \)20,000 in 2018. The company has taxable income of $350,000 in 2016 and is expected to have taxable income in each of the following 2 years. Its enacted tax rate is 34% for all years. This is the company鈥檚 first year of operations. The operating cycle of the business is 2 years. Instructions (a) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (b) Indicate how deferred income taxes will be reported on the balance sheet at the end of 2016.

Question: What are the two basic requirements applied to the measurement of current and deferred income taxes at the date of the financial statements?

Under IFRS: (a) 鈥減robable鈥� is defined as a level of likelihood of at least slightly more than 60%. (b) a company should reduce a deferred tax asset when it is likely that some or all of it will not be realized by using a valuation allowance. (c) a company considers only positive evidence when determining whether to recognize a deferred tax asset. (d) deferred tax assets must be evaluated at the end of each accounting period.

Assume the same information as E19-12, except that at the end of 2016, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $45,000. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized in full. (b) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that none of the deferred tax asset will be realized.

Button Company has the following two temporary differences between its income tax expense and income taxes payable2017 2018 2019 Pretax financial income \(840,000 \)910,000 \(945,000 Excess depreciation expense on tax return (30,000) (40,000) (10,000) Excess warranty expense in financial income 20,000 10,000 8,000 Taxable income \)830,000 \(880,000 \)943,000 The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019. (b) Indicate how deferred taxes will be reported on the 2019 balance sheet. Button鈥檚 product warranty is for 12 months. (c) Prepare the income tax expense section of the income statement for 2019, beginning with the line 鈥淧retax financial income.鈥�
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