Question

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

	($ in thousands)
	Situation
	1				2				3				4
Taxable income	$	84			$	216			$	196			$	260
Future deductible amounts		16								20				20
Future taxable amounts						16				16				28
Balance(s) at beginning of the year:
Deferred tax asset		2								9				4
Deferred tax liability						8				2

The enacted tax rate is 25%.

Required:
For each situation, determine the following: (Enter your answers in thousands (i.e., 55,000 should be entered as 55). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.)

Answer 1

		Situation ( $ in thousands )
		1	2	3	4
A)	Income tax payable (Note 1 )	$ 21	$ 54	$ 49	$ 65
B)	Deferred Tax Asset- Balance (Note 2)	$ 4		$ 5	$ 5
C)	Deferred Tax Asset- Change (Note 3)	$ 2		- $4	$ 1
D)	Deferred Tax Liability- Balance (Note 4)		$ 4	$ 4	$ 7
E)	Deferred Tax Liability- Change (Note 5 )		-$4	$ 2	$ 7
F)	Income Tax Expense (Note 6)	$ 19	$ 50	$ 55	$ 71

Explanation :
Notes :
		Situation ( $ in thousands )
		1	2	3	4
1)	Income tax payable = Taxable income * Tax rate	$ 21	$ 54	$ 49	$ 65
		($ 84 *25%)	($ 216*25%)	($ 196*25% )	($ 260*25%)
2)	Deferred Tax asset-Balance= Future deductible amounts * tax rate	$ 4		$ 5	$ 5
		($ 16*25%)		($ 20*25%)	($ 20*25%)
3)	Deferred Tax asset-Change= Deferred Tax asset-Balance - Deferred	$ 2		- $4	$ 1
	Tax asset at the beginning of the year	($ 4- $ 2)		($ 5- $ 9 )	($ 5- $ 4 )
4)	Deferred Tax Liability-Balance= Future Taxable amounts * tax rate		$ 4	$ 4	$ 7
			($ 16*25%)	($ 16*25%)	($ 28*25%)
5)	Deferred Tax Liability-Change= Deferred Tax Liability-Balance - Deferred		- $4	$ 2	$ 7
	Tax Liability at the beginning of the year		($ 4 - $ 8 )	($ 4- $ 2)	($ 7- $0 )
6)	Income tax expense = (Income tax payable + Deferred tax	$ 19	$ 50	$ 55	$ 71
	Liability -Change) - (Deferred Tax asset -Change )	{($ 21+0)-$ 2 )}	{($ 54- $ 4) -$ 0) }	{($ 49+$ 2)-(- $ 4))}	{($65+$ 7)-($ 1)}