Use the following info for 19-21:
i. DTL Jan 1, 2014, $60,000
ii. T/I for 2014, $20,000
iii. cumulative temporary difference at Dec 31, 2014 gives rise to future tax amounts $230,000
iv. T/R = 40%
19. J/E for 2014?
Dr. DTL
Dr. ITP
Cr. DTL
Cr. ITE
20. ITE on 2014 I/S?
8,000
32,000
40,000
108,000
21. Ending DTL balance?
8,000
32,000
92,000
108,000
Solution 19:
Required DTL balance at the end of 2014 = $230,000*40% = $92,000
Existing balance of DTL = $60,000
DTL to be created during 2014 = $92,000 - $60,000 = $32,000
J/E for 2014 include credit to DTL
Hence 3rd option is correct.
Solution 20:
Income tax payable for 2014 = $20,000*40% = $8,000
ITE on I/S = $8,000 + $32,000 = $40,000
Hence 3rd option is correct.
Solution 21:
Ending DTL balance = $230,000*40% = $92,000
Hence 3rd option is correct.