Exercise 1

Unearned revenue = 150,000; tax = 40%

Tax 2015  150k  60,000

Accounting Tax

2015  50,000 100,000  40,000

2016  50,000 (50,000)  (20,000)

2017  50,000 (50,000)  (20,000)

1. Is there deferred tax? YES  DTA because taxable income > accounting income  will
deduct the tax paid in the future
2. Income tax expense  40% x 50,000 = 20,000
3. Current tax expense  60,000
4. Deferred tax = 40,000 (40% x (150,000 – 50,000) or 60,000 – 20,000)

Exercise 2

2015 = 200,000; 2016 = +10,000; 2017 = +20,000; 2018 = +15,000

DTL = 10,000 + 20,000 + 15,000 = 45,000

Taxable income = 200,000 – DTL = 155,000

1. Deferred tax? YES  DTL because taxable income < accounting income  will increase the
amount tax paid in the future
2. Income tax expense = 40% * 200,000 = 80,000
3. Current tax expense = 40% * 155,000 = 62,000
4. Deferred tax 2015 = 62,000 – 80,000 = (18,000)

Exercise 3

2015 = 200,000  tax = 0.4*200,000 = 80,000

DTA = 30,000 + 70,000 + 10,000 = 110,000

Taxable income = 200,000 + 110,000 = 310,000  tax = 310,000 * 0.4 = 124,000

Deferred tax = 124,000 – 110,000 = 14,000