Chapter 16, Problem 16.7P

1.

To determine

Deferred Tax

Deferred tax is an amount i.e. computed on the basis of tax liability on the income as per income statement and the income as per tax return, that difference is known as deferred tax. Deferred tax amount is deferred to the next financial year.

Deferred tax asset

When the Income Tax Expense account is more than the Income Tax Payable account, this difference is known as Deferred Tax Asset.

Deferred tax liability

When the Income Tax Expense account is less than the Income Tax Payable account, this difference is known as Deferred Tax Liability.

To determine: The amounts necessary to record income taxes for 2016 and prepare journal entries.

2.

To determine

The net income of Company S for the year 2016

3.

To determine

To show:  how the deferred tax amounts classified and reported in the balance sheet of 2016.