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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’s 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 tax =Deferred tax liability−Deferred tax asset=$69,000−$24,000=$45,000

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Most popular questions from this chapter

The following information is available for Wenger Corporation for 2016 (its first year of operations). 1. Excess of tax depreciation over book depreciation, \(40,000. This \)40,000 difference will reverse equally over the years 2017–2020. 2. Deferral, for book purposes, of \(20,000 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, \)300,000. 4. Tax rate for all years, 40%. Instructions (a) Compute taxable income for 2016. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $325,000.

Question: Access the glossary (“Master Glossary”) to answer the following.

(a) What is a deferred tax asset?

(b) What is taxable income?

(c) What is the definition of valuation allowance?

(d) What is a deferred tax liability?

South Carolina Corporation has one temporary difference at the end of 2017 that will reverse and cause taxable amounts of \(55,000 in 2018, \)60,000 in 2019, and \(65,000 in 2020. South Carolina’s pretax financial income for 2017 is \)300,000, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2017. Instructions (a) Compute taxable income and income taxes payable for 2017. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017. (c) Prepare the income tax expense section of the income statement for 2017, beginning with the line “Income before income taxes.”

Mitchell Corporation had income before income taxes of \(195,000 in 2017. Mitchell’s current income tax expense is \)48,000, and deferred income tax expense is $30,000. Prepare Mitchell’s 2017 income statement, beginning with Income before income taxes.

Under IFRS: (a) “probable” 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.
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