On December 31, DePaul Corporation had the following cumulative temporary differences associated with its operations: 1. Estimated warranty expense, $28 million temporary difference: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty). 2. Depreciation expense, $108 million temporary difference: straight-line in the income statement; MACRS on the tax return. 3. Income from installment sales of properties, $60 million temporary difference: income recorded in the year of the sale; taxable when received equally over the next five years. 4. Rent revenue collected in advance, $28 million temporary difference; taxable in the year collected; recorded as income when the performance obligation is satisfied in the following year. Required: Assuming DePaul will show a single noncurrent net amount in its December 31 balance sheet, indicate that amount and whether it is a net deferred tax asset or liability. The tax rate is 25%. Note: Enter your answer in millions (i.e., 10,000,000 should be entered as 10).
On December 31, DePaul Corporation had the following cumulative temporary differences associated with its operations: 1. Estimated warranty expense, $28 million temporary difference: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty). 2. Depreciation expense, $108 million temporary difference: straight-line in the income statement; MACRS on the tax return. 3. Income from installment sales of properties, $60 million temporary difference: income recorded in the year of the sale; taxable when received equally over the next five years. 4. Rent revenue collected in advance, $28 million temporary difference; taxable in the year collected; recorded as income when the performance obligation is satisfied in the following year. Required: Assuming DePaul will show a single noncurrent net amount in its December 31 balance sheet, indicate that amount and whether it is a net deferred tax asset or liability. The tax rate is 25%. Note: Enter your answer in millions (i.e., 10,000,000 should be entered as 10).
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 47P
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Transcribed Image Text:On December 31, DePaul Corporation had the following cumulative temporary differences associated with its operations:
1. Estimated warranty expense, $28 million temporary difference: expense recorded in the year of the sale; tax-deductible
when paid (one-year warranty).
2. Depreciation expense, $108 million temporary difference: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $60 million temporary difference: income recorded in the year of the sale;
taxable when received equally over the next five years.
4. Rent revenue collected in advance, $28 million temporary difference; taxable in the year collected; recorded as income when
the performance obligation is satisfied in the following year.
Required:
Assuming DePaul will show a single noncurrent net amount in its December 31 balance sheet, indicate that amount and whether it
is a net deferred tax asset or liability. The tax rate is 25%.
Note: Enter your answer in millions (i.e., 10,000,000 should be entered as 10).
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