At December 31, 2020, Novak Company had a net deferred tax liability of $445,000. An explanation of the items that compose this balance is as follows. Temporary Differences in Deferred Taxes Resulting Balances 1. Excess of tax depreciation over book depreciation. $ 188,000 2. Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2021. The loss will be deducted on the tax return when paid. $ (55,000 ) 3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. $ 312,000 In analyzing the temporary differences, you find that $32,000 of the depreciation temporary difference will reverse in 2021, and $122,000 of the temporary difference due to the installment sale will reverse in 2021. The tax rate for all years is 40%. Indicate the manner in which deferred taxes should be presented on Novak Company's December 31, 202O, statement of fınancial position.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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In analyzing the temporary differences, you find that $32,000 of the depreciation temporary difference will reverse in 2021, and
$122,000 of the temporary difference due to the installment sale will reverse in 2021. The tax rate for all years is 40%.
Indicate the manner in which deferred taxes should be presented on Novak Company's December 31, 2020, statement of financial
position.
Novak Company
Balance Sheet (Partial)
December 31, 2020
Noncurrent Liabilities
Deferred Tax Liability
$
%24
Transcribed Image Text:In analyzing the temporary differences, you find that $32,000 of the depreciation temporary difference will reverse in 2021, and $122,000 of the temporary difference due to the installment sale will reverse in 2021. The tax rate for all years is 40%. Indicate the manner in which deferred taxes should be presented on Novak Company's December 31, 2020, statement of financial position. Novak Company Balance Sheet (Partial) December 31, 2020 Noncurrent Liabilities Deferred Tax Liability $ %24
At December 31, 2020, Novak Company had a net deferred tax liability of $445,000. An explanation of the items that compose this
balance is as follows.
Temporary Differences in Deferred Taxes
Resulting Balances
1.
Excess of tax depreciation over book depreciation.
$ 188,000
2.
Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is
expected
to be settled in 2021. The loss will be deducted on the tax return when paid.
$
(55,000 )
3. Accrual method used for book purposes and installment method used for tax purposes for an
isolated installment sale of an investment.
$ 312,000
In analyzing the temporary differences, you find that $32,000 of the depreciation temporary difference will reverse in 2021, and
$122,000 of the temporary difference due to the installment sale will reverse in 2021. The tax rate for all years is 40%.
Indicate the manner in which deferred taxes should be presented on Novak Company's December 31, 2020, statement of financial
position.
Transcribed Image Text:At December 31, 2020, Novak Company had a net deferred tax liability of $445,000. An explanation of the items that compose this balance is as follows. Temporary Differences in Deferred Taxes Resulting Balances 1. Excess of tax depreciation over book depreciation. $ 188,000 2. Accrual, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2021. The loss will be deducted on the tax return when paid. $ (55,000 ) 3. Accrual method used for book purposes and installment method used for tax purposes for an isolated installment sale of an investment. $ 312,000 In analyzing the temporary differences, you find that $32,000 of the depreciation temporary difference will reverse in 2021, and $122,000 of the temporary difference due to the installment sale will reverse in 2021. The tax rate for all years is 40%. Indicate the manner in which deferred taxes should be presented on Novak Company's December 31, 2020, statement of financial position.
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