A company has a temporary difference dueto doubtful accounts (i.e., bad debt expense).For fiscal year 2012, its Income Tax Payablewas $10,000 greater than its Income TaxExpense.What happened to deferred taxes in 2012?Deferred Tax Liabilities decreased by$10,000Deferred Tax Assets increased by$10,000Deferred Tax Liabilities increased by$10,000Deferred Tax Assets decreased by$10,000There was no effect on Deferred TaxAssets or Deferred Tax LiabilitiesO O O

Solution: Bad debt expense is future deductible on actual write off basis. Therefore it will create…

A company has a temporary difference due to doubtful accounts (i.e., bad debt expense). For fiscal year 2012, its Income Tax Payable was $10,000 greater than its Income Tax Expense. What happened to deferred taxes in 2012?

A company has a temporary difference due to doubtful accounts (i.e., bad debt expense). For fiscal year 2012, its Income Tax Payable was $10,000 greater than its Income Tax Expense. What happened to deferred taxes in 2012?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company has accounts receivable of $300 000 and an associated doubtful debts allowance of $60 000. The revenue associated with the accounts receivable of $300 000 has already been included in taxable profit. The doubtful debts will be deductible when the amount is actually written off as bad with a related deduction to accounts receivable. REQUIRED a) Assuming that the tax rate is 30 percent, what is the amount of the temporary difference? b) Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability Please donot provide solution in image format provide solution in step by step format and asap
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