deferred_tax_assets_solution

deferred_tax_assets_solution - x Tax rate 35% 30% 30% 20% =...

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Accounting for future taxable amounts – deferred tax assets – SOLUTION Jesse Company had pretax financial income of $700,000 for the year ended December 31, 2009. In 2009, Jesse accrued estimated warranty expenses of $200,000 for book purposes none of which is currently deductible on their tax return. This is reflected in Jesse’s December 31, 2009 balance sheet as follows: GAAP Tax Warranty liability ($200,000) $0 The tax rate for 2009 is 40%. The actual product warranty costs are expected to be paid as follows: amount Year paid Tax rate 2010 80,000 35% 2011 60,000 30% 2012 40,000 30% 2013 20,000 20% 200,000 Required : What amount should Jason report as deferred tax asset at December 31, 2009? Also, look at Jesse’s books for 2010-2013 if they report pretax financial income of $700,000 each year. 2009 2010 2011 2012 2013 Total Future deductible amounts 80 60 40 20 200
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Unformatted text preview: x Tax rate 35% 30% 30% 20% = Deferred tax asset 28 18 12 4 Deferred tax asset December 31, 2009 $62 All numbers expressed in thousands (000’s omitted) Summary of Jesse Company’s Books Deferred Tax Computations [2009-2013] 2009 2010 2011 2012 2013 TOTALS Pretax book income 700 700 700 700 700 3,500 Less: Originating diff. 200 Add: Reversing diff. (80) (60) (40) (20) = Taxable income 900 620 640 660 680 3,500 x Tax rate 40% 35% 30% 30% 20% = Income taxes payable 360 217 192 198 136 Jesse’s JE Income tax expense 298 245 210 210 140 1,103 Deferred tax asset 62 ( 28 ) ( 18 ) ( 12 ) ( 4 ) Income taxes payable ( 360 ) ( 217 ) ( 192 ) ( 198 ) ( 136 ) (1,103) Debit ( credit ) Jesse’s I/S Pretax book income 700 700 700 700 700 Less: Income tax expense (298) (245) (210) (210) (140) Net income 402 455 490 490 560 All numbers expressed in thousands (000’s omitted)...
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This note was uploaded on 03/04/2010 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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deferred_tax_assets_solution - x Tax rate 35% 30% 30% 20% =...

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