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Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: SITUATION 1 2 Taxable income $ 48,000 $ 88,000 Amounts at year-end: Future deductible amounts 5,800 10,800 Future taxable amounts 0 5,800 Balances at beginning of year, dr (cr): Deferred tax asset $ 1,000 $ 3,240 Deferred tax liability 0 1,000 The enacted tax rate is 30% for both situations. Required: For each situation determine the: Situation 1 and 2 a. income tax payable currently b. deferred tax asset – balance at year-end c. deferred tax asset change dr or cr for the year d. deferred tax liability – balance at year-end e. deferred tax liability change dr or cr for the year f. income tax expense for the year.

Question

Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: SITUATION 1 2 Taxable income $ 48,000 $ 88,000 Amounts at year-end: Future deductible amounts 5,800 10,800 Future taxable amounts 0 5,800 Balances at beginning of year, dr (cr): Deferred tax asset $ 1,000 $ 3,240 Deferred tax liability 0 1,000 The enacted tax rate is 30% for both situations. Required: For each situation determine the: Situation 1 and 2 a. income tax payable currently b. deferred tax asset – balance at year-end c. deferred tax asset change dr or cr for the year d. deferred tax liability – balance at year-end e. deferred tax liability change dr or cr for the year f. income tax expense for the year.

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