2020 2021 2022

Accounting Income 4,000,000 5,000,000 7,000,000

Taxable Income 3,000,000 5,500,000 7,500,000

2020 2021
Accounting Income 5,000,000 7,000,000
Taxable Income 5,600,000 6,400,000

2021 Carrying Amount Tax Base Difference

Computer SW Cost
Building
Accrued Liability -HC
Accounting Income per Book 6,000,000
Nondeductible Expenses 500,000
Nontaxable Revenue 300,000
Doubtful Accounts 200,000
Estimated Warranty Cost recognized
as expense in 2020 when sales were
made but deductible for tax when paid 400,000
Accounting Depreciation 600,000
Tax Depreciation 800,000
Gross income on Installment Sale
included in accounting income but
taxable only in 2021 100,000
Income Tax Rate 30%
 REPLACEMENT
COST COST APPRECIATION
EQUIPMENT
ACCUM. DEP'N

CA / SV / RS

ACCOUNTING INCOME
PERMANENT DIFFERENCES
NONTAXABLE REVENUE
NONDEDUCTIBLE EXPENSES
ACCOUNTING INCOME subject to tax
TEMPORARY DIFFERENCES
DEDUCTIBLE TEM. DIFF.
TAXABLE TEMP. DIFF

TAXABLE INCOME
 DIFFERENCES
NONTAXABLE REVENUE
NONDEDUCTIBLE EXPENSES
G INCOME subject to tax
DIFFERENCES
DEDUCTIBLE TEM. DIFF.
TAXABLE TEMP. DIFF
 PROBLEM 16-9
2020 SIMPLE COMPANY Computer SW Cost
ACCOUNTING ### 31-Dec Income Tax expense 2,400,000 Building
TAXABLE Income Tax Payable 2,400,000 Accrued Liability -HC
TAX RATE 30% To record current tax expense
PAYMENT Computer SW Cost
31-Dec Income Tax expense 2,100,000 Building
Deferred Tax Liability 2,100,000 Taxable Temp. Difference
To record deferred tax expense TAX RATE
Deferred Tax Liability
31-Dec Deferred Tax Asset 600,000
Income Tax Benefit 600,000 Deductible Temp Difference
To record income tax benefit TAX RATE
Deferred Tax Asset

Pretax Accounting Income

ACCOUNTING INCOME ### SW cost entirely expense
Income Tax expense Excess Tax Depreciation
Current Tax Expense 2,400,000 HC Ben not yet deductible
Deferred Tax Expense 2,100,000 Taxable Income
Income Tax Benefit (600,000) 3,900,000 0 TAX RATE
NET INCOME 9,100,000 Current Tax Expense
Tax Payment
Income Tax Payable

2021
31-Dec Income Tax expense 3,450,000 Computer SW Cost
Income Tax Payable 3,450,000 Building
To record current tax expense Accrued Liability -HC

31-Dec Deferred Tax Liability 300,000 Pretax Accounting Income

Income Tax expense 300,000 SW cost entirely expense
To record decreased in DTL Excess Tax Depreciation
HC Ben not yet deductible
31-Dec Income Tax expense 450,000 Taxable Income
Deferred Tax Asset 450,000 TAX RATE
To record decrease in DTA Current Tax Expense

ACCOUNTING INCOME ### STATEMENT OF FINANCIAL P

Income Tax expense NONCURRENT ASSET
Current Tax Expense 3,450,000 Deferred Tax Asset
Decrease in DTL -300,000 CURRENT LIABILITY
Decrease in DTA 450,000 3,600,000 Income Tax Payable
NET INCOME 8,400,000 NONCURRENT LIABILITY
Deferred Tax Liability
PROBLEM 16-10
 2020 EASY COMPANY
ACCOUNTING ### 1-Jan Equipment 4,000,000
TAXABLE Accumulated Deprerciation 1,500,000
TAX RATE 30% Revaluation Surplus 2,500,000 8 3
PAYMENT To record current tax expense

1-Jan Revaluation Surplus 750,000

Deferred Tax Liability 750,000 Revaluation Surplus
To record deferred tax liability Deferred Tax Liability
Net Revaluation Surplus
7,500,000 5 31-Dec Depreciation Expense 1,500,000
Accumulated Depreciation 1,500,000 Equipment @ Replacement Co
To record depreciation Accumulated Depreciation
Jan 1, 2020
1,750,000 5 31-Dec Revaluation Surplus 350,000 Dep'n 2020
Retained Earnings 350,000 Carrying Amount - Dec 31,2020
To record realization of revaluation surplus Equipment @ Cost
Accumulated Depreciation
31-Dec Deferred Tax Liability 150,000 Jan 1, 2020
Income Tax expense 150,000 Dep'n 2020
To record decrease in DTL RAX BASE - Dec 31,2020
TAXABLE TEMPORARY DIFFERE
31-Dec Income Tax expense 2,700,000
Income Tax Payable 2,700,000 Deferred Tax Liability - Dec 31,
To recordcurrent tax expense Deferred Tax Liability - Jan 1, 2
Decrease in Deferred Tax liabil

Pretax Accounting Income before depreciation ### Pretax Accounting Income befo
Depreciation based on revalued amount 1,500,000 Depreciation based on cost
ACCOUNTING INCOME 8,500,000 Taxable Income
Income Tax expense TAX RATE
Current Tax Expense 2,700,000 Current Tax Expense
Decrease in DTL (150,000) 2,550,000 0 Tax Payment
NET INCOME 5,950,000 Income Tax Payable
Revaluation Surplus Realization 350,000
Total Effect on Retained Earnings 6,300,000
 Tax Base Difference
Carrying Amount PROBLEM 16-11
Computer SW Cost 4,000,000 0 4,000,000 2020
15,000,000 12,000,000 3,000,000 ACCOUNTING 8,000,000 31-Dec Income Tax expense
Accrued Liability -HC 2,000,000 0 2,000,000 TAXABLE
TAX RATE 30%
Computer SW Cost 4,000,000 PAYMENT
3,000,000 31-Dec Income Tax expense
Taxable Temp. Difference 7,000,000
30%
Deferred Tax Liability 2,100,000
31-Dec Deferred Tax Asset
Deductible Temp Difference 2,000,000
30%
Deferred Tax Asset 600,000
Deferred Tax Expense
Pretax Accounting Income ### Income Tax Benefit
SW cost entirely expense -4,000,000 Net Deferred Tax Benefit
Excess Tax Depreciation -3,000,000 Current Tax Expense
HC Ben not yet deductible 2,000,000 -5,000,000 Total Income Tax Expense
Taxable Income 8,000,000
30%
Current Tax Expense 2,400,000
Tax Payment 0 ACCOUNTING INCOME
Income Tax Payable 2,400,000 Income Tax expense
Current Tax Expense
Tax Base Difference
Carrying Amount Deferred Tax Expense
Computer SW Cost 2,000,000 0 2,000,000 Income Tax Benefit
10,000,000 6,000,000 4,000,000 NET INCOME
Accrued Liability -HC 500,000 0 500,000

Pretax Accounting Income ###

SW cost entirely expense 2,000,000 PROBLEM 16-12
Excess Tax Depreciation -1,000,000 2020
HC Ben not yet deductible -1,500,000 -500,000 ACCOUNTING 9,000,000 31-Dec Income Tax expense
Taxable Income 11,500,000 TAXABLE
30% TAX RATE 30%
Current Tax Expense 3,450,000 PAYMENT
31-Dec Income Tax expense
STATEMENT OF FINANCIAL POSITION 2020 2021
NONCURRENT ASSET
Deferred Tax Asset 600,000 150,000
CURRENT LIABILITY 31-Dec Deferred Tax Asset
Income Tax Payable 2,400,000 3,450,000
NONCURRENT LIABILITY
Deferred Tax Liability 2,100,000 1,800,000
REPLACEMENT Deferred Tax Expense
 COST COST APPRECIATION Income Tax Benefit
EQUIPMENT 8,000,000 12,000,000 4,000,000 Net Deferred Tax Expense
ACCUM. DEP'N Current Tax Expense
1000000 3,000,000 Total Income Tax Expense
1500000 4,500,000 1,500,000
CA / SV / RS 5,000,000 7,500,000 2,500,000

Revaluation Surplus 2,500,000 ACCOUNTING INCOME

Deferred Tax Liability 30% 750,000 Income Tax expense
Net Revaluation Surplus 1,750,000 Current Tax Expense
Deferred Tax Expense
Equipment @ Replacement Cost 12,000,000 Income Tax Benefit
Accumulated Depreciation NET INCOME
Jan 1, 2020 4,500,000
Dep'n 2020 1,500,000 6,000,000
Carrying Amount - Dec 31,2020 6,000,000
Equipment @ Cost 8,000,000
Accumulated Depreciation
Jan 1, 2020 3,000,000
Dep'n 2020 1,000,000 4,000,000
RAX BASE - Dec 31,2020 4,000,000
TAXABLE TEMPORARY DIFFERENCE 2,000,000

Deferred Tax Liability - Dec 31, 2020 30% 600,000

Deferred Tax Liability - Jan 1, 2020 750,000
Decrease in Deferred Tax liability -150,000

Pretax Accounting Income before depreciation ###

Depreciation based on cost 1,000,000
Taxable Income 9,000,000
30%
Current Tax Expense 2,700,000
Tax Payment 0
Income Tax Payable 2,700,000
 Tax Base
Carrying Amount

ALOHA COMPANY Accounts Receivable 1,500,000 1,750,000

Income Tax expense 2,436,000 Motor Vehicles 1,650,000 1,250,000
Income Tax Payable 2,436,000 Provision for Warranty 120,000 0
To record current tax expense Deposits received in advance 150,000 0

Income Tax expense 120,000 Taxable Temp. Difference 400,000

Deferred Tax Liability 120,000 TAX RATE 30%
To record deferred tax expense Deferred Tax Liability 120,000

Deferred Tax Asset 156,000 Doubtful Accounts 250,000

Income Tax Benefit 156,000 Provision for Warranty 120,000
To record income tax benefit Deposits received in advance 150,000
Deductible Temp Difference 520,000
Deferred Tax Expense 120,000 TAX RATE 30%
Income Tax Benefit (156,000) Deferred Tax Asset 156,000
Net Deferred Tax Benefit (36,000)
Current Tax Expense 2,436,000 Pretax Accounting Income
Total Income Tax Expense 2,400,000 Excess Tax Depreciation -400,000
Doubtful Accounts 250,000
0 Warranty not yet deductible 120,000
Advances when received 150,000
OUNTING INCOME 8,000,000 Taxable Income
ome Tax expense TAX RATE
Current Tax Expense 2,436,000 Current Tax Expense
Deferred Tax Expense 120,000 Tax Payment
Income Tax Benefit (156,000) 2,400,000 Income Tax Payable
5,600,000

Carrying Amount Tax Base

SIMPLE COMPANY PROPERTY 10,000,000 7,000,000
Income Tax expense 2,400,000 Plant & Equipment 5,000,000 4,000,000
Income Tax Payable 2,400,000 Inventory 4,000,000 6,000,000
To record current tax expense Trade Receivables 3,000,000 4,000,000

Income Tax expense 1,200,000 Excess Tax Depreciation Property 3,000,000

Deferred Tax Liability 1,200,000 Excess Tax Depreciation P&E 1,000,000
To record deferred tax expense Taxable Temp. Difference 4,000,000
TAX RATE 30%
Deferred Tax Asset 900,000 Deferred Tax Liability 1,200,000
Income Tax Benefit 900,000
To record income tax benefit No writedown 2,000,000
No impairment 1,000,000
Deferred Tax Expense 1,200,000 Deductible Temp Difference 3,000,000
 Income Tax Benefit (900,000) TAX RATE 30%
Net Deferred Tax Expense 300,000 Deferred Tax Asset 900,000
Current Tax Expense 2,400,000
Total Income Tax Expense 2,700,000 Pretax Accounting Income
Excess Tax Depreciation Property -3,000,000
0 Excess Tax Depreciation P&E -1,000,000
Writedown, when sold 2,000,000
OUNTING INCOME 9,000,000 Impairment, when collected 1,000,000
ome Tax expense Taxable Income
Current Tax Expense 2,400,000 TAX RATE
Deferred Tax Expense 1,200,000 Current Tax Expense
Income Tax Benefit (900,000) 2,700,000 Tax Payment
6,300,000 Income Tax Payable
Difference
250,000 DTD
400,000 TTD
120,000 DTD
150,000 DTD

8,000,000

120,000
8,120,000
30%
2,436,000
0
2,436,000

Difference
3,000,000 TTD
1,000,000 TTD
-2,000,000 DTD
-1,000,000 DTD
9,000,000

-1,000,000
8,000,000
30%
2,400,000
0
2,400,000
 CORRECT ANSWERS CHOICES
TTD DTD PD TTD
RI 20,000 RI
Rent 50,000 Rent 50,000
Int Inc 120,000 Int Inc
Dev't Cost 200,000 Dev't Cost 200,000
Dep'n 75,000 Dep'n 75,000
Warranty 185,000 Warranty
Premiu 60,000 Premiu
Penalty 15,000 Penalty
TOTAL 325,000 205,000 TOTAL 325,000
30% 97,500 61,500 30% 97,500
DT LIAB ASSET DT LIAB

Pretax Income 400,000 Pretax Income

Permanent Difference Permanent Difference
Int Inc on Depo -120,000 Int Inc on Depo
Premium 60,000 Premium
Penalty 15,000 -45,000 Penalty
Accounting Inc subj to Tax 355,000 106,500 ITE Accounting Inc subj to Tax
Tax Temp Diff Tax Temp Diff
Rent Income 50,000 Rent Income
Dev't Cost 200,000 Dev't Cost
Dep'n 75,000 -325,000 97,500 DTE Dep'n
Ded Temp Diff Ded Temp Diff
Royalty 20,000 Royalty
Warranty 185,000 205,000 61,500 ITB Warranty
TAXABLE INCOME 235,000 70,500 CTE TAXABLE INCOME

Pretax Income 400,000 Pretax Income

Less: Income Tax Expense Less: Income Tax Expense
Current Tax Expense 70,500 Current Tax Expense
Deferred Tax Exp 97,500 Deferred Tax Exp
Income Tax Benefit -61,500 106,500 Income Tax Benefit
Net Income 293,500 Net Income

30%
Pretax Income 1,600,000
Permanent Difference
Int Inc on Depo -50,000
Premium 80,000
Penalty 30,000
Accounting Inc subj to Tax 1,630,000 489,000 ITE
Tax Temp Diff
Installment 120,000
Dev't Cost
Dep'n 250,000 -370,000 111,000 DTE
Ded Temp Diff
 Rent 190,000
Loss 100,000 290,000 87,000 ITB
TAXABLE INCOME 1,550,000 465,000 CTE

Pretax Income 1,600,000

Less: Income Tax Expense
Current Tax Expense 465,000 220,000 66,000
Deferred Tax Exp 111,000
Income Tax Benefit -87,000 489,000
Net Income 1,111,000
 REGAL COMPANY
CHOICES 2019 Current Tax Expense 1,050,000
Divide by 30%
DTD PD TAXABLE INCOME 3,500,000
20,000 ADD: PREPAID INS 1 yrs 200,000
LESS: Litigation Loss -2,000,000
120,000 ACCOUNTING INCOME 1,700,000
Multiply by 30%
INCOME TAX EXPENSE 510,000
185,000
60,000 2019 INCOME TAX EXPENSE 1,020,000
15,000 Divide by 30%
205,000 ACCOUNTING INCOME 3,400,000
61,500 PREPAID INS 1 yrs 200,000
ASSET Litigation Loss -2,000,000
TAXABLE INCOME 1,600,000
400,000 280,000 30%
Current Tax Expense 480,000
-120,000
60,000
15,000 -45,000
355,000 106,500 ITE

50,000
200,000
75,000 -325,000 97,500 DTE

20,000
185,000 205,000 61,500 ITB
235,000 70,500 CTE

400,000
88,500 248,500
70,500 97,500 266,500
97,500 106,500 280,000
-61,500 106,500
293,500
 PROBLEM 16-1
2020 ABC COMPANY
ACCOUNTING 2,000,000 2020 Income Tax expense 200,000 Taxable Income
TAXABLE 1,500,000 Cash 200,000 TAX RATE
TAX RATE 30% To record payment Current Tax Expense
PAYMENT 200,000 Tax Payment
31-Dec Income Tax expense 250,000 Income Tax Payable
Income Tax Payable 250,000
To record current tax expense Pretax Financial Income
Taxable Income
31-Dec Income Tax expense 150,000 Taxable Temp. Difference
Deferred Tax Liability 150,000 TAX RATE
To record deferred tax expense Deferred Tax Liability
0
ACCOUNTING INCOME 2,000,000
Income Tax expense
Current Tax Expense 450,000
Deferred Tax Expense 150,000 600,000
NET INCOME 1,400,000

PROBLEM 16-2
2020 ZEUS COMPANY
ACCOUNTING 3,000,000 2020 Income Tax expense 500,000 Taxable Income
TAXABLE 4,000,000 Cash 500,000 TAX RATE
TAX RATE 30% To record payment Current Tax Expense
PAYMENT 500,000 Tax Payment
31-Dec Income Tax expense 700,000 Income Tax Payable
Income Tax Payable 700,000
To record current tax expense Pretax Financial Income
0 Taxable Income
31-Dec Deferred Tax Asset 300,000 Deductible Temp. Difference
Income Tax Benefit 300,000 TAX RATE
To record income tax benefit Deferred Tax Asset

ACCOUNTING INCOME 3,000,000

Income Tax expense
Current Tax Expense 1,200,000
Income Tax Benefit (300,000) 900,000
NET INCOME 2,100,000

PROBLEM 16-3
2020 2020 ARGENTINA COMPANY
ACCOUNTING 6,000,000 31-Dec Income Tax expense 2,100,000 Taxable Income
TAXABLE 7,000,000 Income Tax Payable 2,100,000 TAX RATE
TAX RATE 30% To record current tax expense Current Tax Expense
PAYMENT 0 Tax Payment
 31-Dec Deferred Tax Asset 300,000 Income Tax Payable
Income Tax Benefit 300,000
To record income tax benefit Pretax Financial Income
Taxable Income
ACCOUNTING INCOME 6,000,000 Deductible Temp. Difference
Income Tax expense TAX RATE
Current Tax Expense 2,100,000 Deferred Tax Asset
Income Tax Benefit (300,000) 1,800,000
NET INCOME 4,200,000

2021 2021 ARGENTINA COMPANY

ACCOUNTING 9,000,000 31-Dec Income Tax expense 2,400,000 Taxable Income
TAXABLE 8,000,000 Income Tax Payable 2,400,000 TAX RATE
TAX RATE 30% To record current tax expense Current Tax Expense
PAYMENT 0 Tax Payment
31-Dec Income Tax expense 300,000 Income Tax Payable
Deferred Tax Asset 300,000
To decrease deferred tax asset Pretax Financial Income
Taxable Income
ACCOUNTING INCOME 9,000,000 Deductible Temp. Difference
Income Tax expense TAX RATE
Current Tax Expense 2,400,000 Decrease in DTA
Decrease in Deferred Tax Ass 300,000 2,700,000
NET INCOME 6,300,000

PROBLEM 16-4
2020 2020 COLOMBO COMPANY
ACCOUNTING 5,500,000 31-Dec Income Tax expense 1,500,000 Taxable Income
TAXABLE 5,000,000 Income Tax Payable 1,500,000 TAX RATE
TAX RATE 30% To record current tax expense Current Tax Expense
PAYMENT 0 Tax Payment
31-Dec Income Tax expense 150,000 Income Tax Payable
Deferred Tax Liability 150,000
To record deferred tax expense Pretax Financial Income
Taxable Income
ACCOUNTING INCOME 5,500,000 Taxable Temp. Difference
Income Tax expense TAX RATE
Current Tax Expense 1,500,000 Deferred Tax Liability
Deferred Tax Expense 150,000 1,650,000
NET INCOME 3,850,000

2021 2021 COLOMBO COMPANY

ACCOUNTING 7,000,000 31-Dec Income Tax expense 2,250,000 Taxable Income
TAXABLE 7,500,000 Income Tax Payable 2,250,000 TAX RATE
TAX RATE 30% To record current tax expense Current Tax Expense
PAYMENT 0 Tax Payment
31-Dec Deferred Tax Liability 150,000 Income Tax Payable
Income Tax expense 150,000
To decrease deferred tax liability Pretax Financial Income
Taxable Income
ACCOUNTING INCOME 7,000,000 Taxable Temp. Difference
Income Tax expense TAX RATE
Current Tax Expense 2,250,000 Decrease in DTL
Decrease in Deferred Tax Liabi (150,000) 2,100,000
NET INCOME 4,900,000
 PROBLEM 16-5
Income before 2020 2021 2022
able Income ### construction income 2,400,000 3,600,000 3,200,000
30% Percentage of Completion 600,000 1,500,000 900,000
rent Tax Expense 450,000 ACCOUNTING INCoME 3,000,000 5,100,000 4,100,000
200,000 Cost Recovery Method 0 0 3,000,000
ome Tax Payable 250,000 TAXABLE INCOME 2,400,000 3,600,000 6,200,000
DIFFERENCES 600,000 1,500,000 (2,100,000)
tax Financial Income 2,000,000
able Income 1,500,000 2020 30% VALLEY COMPANY
able Temp. Difference 500,000 31-Dec Income Tax expense 720,000
30% Income Tax Payable 720,000
erred Tax Liability 150,000 To record current tax expense

31-Dec Income Tax expense 180,000

Deferred Tax Liability 180,000
To record deferred tax expense

ACCOUNTING INCOME 3,000,000

Income Tax expense
Current Tax Expense 720,000
Deferred Tax Expense 180,000 900,000
able Income ### NET INCOME 2,100,000
30%
rent Tax Expense 1,200,000
500,000 2021 30% VALLEY COMPANY
ome Tax Payable 700,000 31-Dec Income Tax expense 1,080,000
Income Tax Payable 1,080,000
tax Financial Income 3,000,000 To record current tax expense
able Income 4,000,000
ductible Temp. Difference 1,000,000 31-Dec Income Tax expense 450,000
30% Deferred Tax Liability 450,000
erred Tax Asset 300,000 To record deferred tax expense

ACCOUNTING INCOME 5,100,000

Income Tax expense
Current Tax Expense 1,080,000
Income Tax Benefit 450,000 1,530,000
NET INCOME 3,570,000

2022 30% VALLEY COMPANY

able Income ### 31-Dec Income Tax expense 1,860,000
30% Income Tax Payable 1,860,000
rent Tax Expense 2,100,000 To record current tax expense
0
ome Tax Payable 2,100,000 31-Dec Deferred Tax Liability 630,000
Income Tax expense 630,000
tax Financial Income 6,000,000 To decrease deferred tax liability
able Income 7,000,000
ductible Temp. Difference 1,000,000 ACCOUNTING INCOME 4,100,000
30% Income Tax expense
erred Tax Asset 300,000 Current Tax Expense 1,860,000
0 Decrease in Deferred Tax Liability (630,000) 1,230,000
NET INCOME 2,870,000

able Income ### Income before 2020 2021 2022

30% construction income 2,400,000 3,600,000 3,200,000
rent Tax Expense 2,400,000
0
ome Tax Payable 2,400,000

tax Financial Income 9,000,000

able Income 8,000,000
ductible Temp. Difference 1,000,000
30%
rease in DTA 300,000

able Income ### 2020 30% COMPLEX COMPANY

30% 31-Dec Income Tax expense 756,000
rent Tax Expense 1,500,000 Income Tax Payable 756,000
0 To record current tax expense
ome Tax Payable 1,500,000
31-Dec Deferred Tax Asset 156,000
tax Financial Income 5,500,000 Income Tax Benefit 156,000
able Income 5,000,000 To record income tax benefit
able Temp. Difference 500,000
30% 2021 30% COMPLEX COMPANY
erred Tax Liability 150,000 31-Dec Income Tax expense 852,000
Income Tax Payable 852,000
To record current tax expense

31-Dec Income Tax expense 48,000

able Income ### Deferred Tax Asset 48,000
30% To decrease deferred tax asset
rent Tax Expense 2,250,000
0 2022 30% COMPLEX COMPANY
ome Tax Payable 2,250,000 31-Dec Income Tax expense 1,164,000
Income Tax Payable 1,164,000
tax Financial Income 7,000,000 To record current tax expense
able Income 7,500,000
able Temp. Difference -500,000 31-Dec Income Tax expense 36,000
30% Deferred Tax Asset 36,000
rease in DTL -150,000 To decrease deferred tax asset

2023 30% COMPLEX COMPANY

31-Dec Income Tax expense 1,428,000
Income Tax Payable 1,428,000
To record current tax expense

31-Dec Income Tax expense 72,000

Deferred Tax Asset 72,000
To decrease deferred tax asset
 PROBLEM 16-6
Income before 2020 2021 2022 2023
depreciation 4,000,000 4,000,000 4,000,000 4,000,000
Straight Line Method 250,000 250,000 250,000 250,000
ACCOUNTING INCoME 3,750,000 3,750,000 3,750,000 3,750,000
SYD 400,000 300,000 200,000 100,000
TAXABLE INCOME 3,600,000 3,700,000 3,800,000 3,900,000
DIFFERENCES 150,000 50,000 (50,000) (150,000)

2020 30% AYE COMPANY ACCOUNTING INCOM

31-Dec Income Tax expense 1,080,000 Income Tax expense
Income Tax Payable 1,080,000
To record current tax expense
NET INCOME
31-Dec Income Tax expense 45,000
Deferred Tax Liability 45,000
To record deferred tax expense

2021 30% AYE COMPANY ACCOUNTING INCOM

31-Dec Income Tax expense 1,110,000 Income Tax expense
Income Tax Payable 1,110,000
0 To record current tax expense
NET INCOME
31-Dec Income Tax expense 15,000
Deferred Tax Liability 15,000 NONCURRENT LIABIL
To record deferred tax expense

2022 30% AYE COMPANY ACCOUNTING INCOM

31-Dec Income Tax expense 1,140,000 Income Tax expense
Income Tax Payable 1,140,000
To record current tax expense ###
NET INCOME
31-Dec Deferred Tax Liability 15,000
Income Tax expense 15,000
To decrease deferred tax liability

2023 30% AYE COMPANY ACCOUNTING INCOM

0 31-Dec Income Tax expense 1,170,000 Income Tax expense
Income Tax Payable 1,170,000
To record current tax expense 0
NET INCOME
31-Dec Deferred Tax Liability 45,000
Income Tax expense 45,000
To decrease deferred tax liability
 PROBLEM 16-8 PRETAX ACCOUNTING
2020 30% SHANGRILA COMPANY Deductible Temporary
31-Dec Income Tax expense 2,280,000
Income Tax Payable 2,280,000
To record current tax expense Taxable Temporary Di

31-Dec Deferred Tax Asset 210,000 TAXABLE INCOME

0 Income Tax Benefit 210,000
To record income tax benefit Partia
ACCOUNTING INCOM
31-Dec Income Tax expense 300,000 Income Tax expense
Deferred Tax Liability 300,000
To record deferred tax expense

Deferred Tax Expense 300,000 NET INCOME

Income Tax Benefit (210,000)
Net Deferred Tax Expense 90,000
Partial Statem
NONCURRENT ASSET

CURRENT LIABILITY

NONCURRENT LIABIL

PROBLEM 16-7 ACCOUNTING INCOM

2020 2021 2022 2023
Income before Tax
2,000,000 3,000,000 4,000,000 5,000,000
Doubtful Accounts Exp 100,000 (100,000)
Unearned Rent income 120,000 (40,000) (40,000) (40,000)
Estimated Warranty Costs 300,000 (20,000) (80,000) (200,000)
Taxable Income 2,520,000 2,840,000 3,880,000 4,760,000 TAXABLE INCOME
DIFFERENCES (520,000) 160,000 120,000 240,000

NONCURRENT ASSET-2021
DEFERRED TAX ASSET 156,000 108,000 72,000 0

INCOME TAX EXPENSE 600,000 900,000 1,200,000 1,500,000

Current Tax Expense 756,000 852,000 1,164,000 1,428,000
ITB / Dec in DTA (156,000) 48,000 36,000 72,000
NET INCOME 1,400,000 2,100,000 2,800,000 3,500,000
30% 600,000 900,000 1,200,000 1,500,000
 NONCURRENT ASSET-2021
DEFERRED TAX ASSET 108,000

2020 2021 2022 2023

Income before Tax
2,000,000 3,000,000 4,000,000 5,000,000
Doubtful Accounts Exp
Unearned Rent income
Estimated Warranty Costs
Taxable Income
DIFFERENCES
ACCOUNTING INCOME 3,750,000
Income Tax expense
Current Tax Expense 1,080,000
Deferred Tax Expense 45,000 1,125,000 0
NET INCOME 2,625,000

ACCOUNTING INCOME 3,750,000

Income Tax expense
Current Tax Expense 1,110,000
Income Tax Benefit 15,000 1,125,000 0
NET INCOME 2,625,000

NONCURRENT LIABILITY
DEFERRED TAX LIABILITY 60,000

ACCOUNTING INCOME 3,750,000

Income Tax expense
Current Tax Expense 1,140,000
Decrease in Deferred Tax Liabilit (15,000) 1,125,000 0
NET INCOME 2,625,000

ACCOUNTING INCOME 3,750,000

Income Tax expense
Current Tax Expense 1,170,000
Decrease in Deferred Tax Liabilit (45,000) 1,125,000 0
NET INCOME 2,625,000
PRETAX ACCOUNTING INCOME 7,900,000
Deductible Temporary difference
Litigation Loss 400,000
Warranty Cost 300,000 700,000
Taxable Temporary Difference
Excess Tax Depreciation 1,000,000 ###
TAXABLE INCOME 7,600,000

Partial Income Statement

ACCOUNTING INCOME 7,900,000
Income Tax expense
Current Tax Expense 2,280,000
Income Tax Benefit (210,000)
Deferred Tax Expense 300,000 2,370,000 0
NET INCOME 5,530,000

Partial Statement of FINANCIAL POSITION

NONCURRENT ASSET
DEFERRED TAX ASSET 210,000

CURRENT LIABILITY
INCOME TAX PAYAB LE 2,280,000
NONCURRENT LIABILITY
DEFERRED TAX LIABILITY 300,000

ACCOUNTING INCOME

TAXABLE INCOME