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Exercise 19-9 At December 31, 2016, Buffalo Company had a net deferred tax liability of $380,200....

Exercise 19-9

At December 31, 2016, Buffalo Company had a net deferred tax liability of $380,200. An explanation of the items that compose this balance is as follows.

Temporary Differences

Resulting Balances
in Deferred Taxes
1. Excess of tax depreciation over book depreciation

$183,500
2. Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2017. The loss will be deducted on the tax return when paid.

(50,100

)
3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment.

246,800

$380,200


In analyzing the temporary differences, you find that $29,300 of the depreciation temporary difference will reverse in 2017, and $117,100 of the temporary difference due to the installment sale will reverse in 2017. The tax rate for all years is 40%.

Indicate the manner in which deferred taxes should be presented on Buffalo Company’s December 31, 2016, balance sheet.

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Answer #1

- Homeert Page Layout FormulasData Review View as Cut Copy Σ AutoSum Cambria-11 AAWap Tesxt General B l u .-. d-A, 遑锂困Merge & Center. $, % , :08:08 Conditional Format . CellInsert Delete Format 2 ClearFe Select Edting Format Painter Formatting▼ as Table-styles ▼ ▼ ▼ Clipboard Number Cells F7 Resulting Balances in Deferred Taxes Deferred Taxes Asset or Deferred Taxes Liability Temporary Differences Excess of tax depreciation over book depreciation Accrual, for book purposes, of estimated loss contingency from p Accrual method used for book purposes and installment method 183500 Deferred Taxes Liability 50100 Deferred Taxes Asset 246800 Deferred Taxes Liability 380200 3 4 6 Classification Property Plant & Equipment Current Non current 183500 10 11 Lawsuit Obligation/Litigation Accrual 12 13 141 13 16 Current portion of Deferred Taxes Liability in installment sale (117100*40%) 17 Non Current portion of Deferred Taxes Liability in Installment sale (246800-46840) Installment sale Total Classified in Balance Sheet -50100 46840 3260 199960 383460 Current assets Non current liability 46840 199960 -4 Sheet59 Sheet60 Sheet61 Sheet62 Sheet63 Sheet64 Sheet65 Sheet66 Sheet67 Sheet68パ·14 Ready 140% 01:41 05-12-18 Search the web and Windows

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