Chapter 16, Problem 16.24E

Multiple temporary differences; balance sheet presentation

• LO16–4, LO16–5, LO16–6, LO16–8

At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:

1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).

2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.

3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.

4. Rent revenue collected in advance, $25 million; 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 40%.