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Becker Question –

Rom Corp. began business in Year 1 and reported taxable income of $50,000 on its Year 1 tax return. Rom’s enacted tax rate is 30% for Year 1 and future years. All differences except for equipment relate to current balance sheet accounts. The following is a schedule of Rom’s December 31, Year 1, temporary differences in thousands of dollars:
12/31/Year 1
Book basis
over (under)
tax basis
Future taxable
(deductible) amounts
Year 2
Year 3
Year 4
Year 5
Equipment
10
(5)
5
5
5
Warranty liability
(20)
(20)
0
0
0
Deferred compensation liability
(15)
0
(5)
0
(10)
Installment receivables
30
10
0
20
0
Totals
5
(15)
0
25
(5)
What amount should Rom report as current deferred tax asset in its December 31, Year 1 balance sheet under U.S. GAAP?

a.
$4,500
b.
$0
c.
$1,500
d.
$6,000

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answer is C. 1500.
Net differences related to current balance sheet accounts [(20) + (15) + 30] $ (5,000)
× Future enacted tax rate .30
Current deferred tax asset

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break

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OK, I know current and non-current are netted separately. I know it is asking for current. Apparently they include:
warranty liability
Deferred Compensation liability
Installment receivables.
So, why is warranty liability current? I thought this is common non-current liability. And what’s the reasoning for deferred compensation liability being current?

 

 

[wjxhahaha]

oops, that table is awful. Here's the arranged one.
———————————————————————————-
First Number in each row is 12/31Year 1 Book basis over(under) tax basis, the rest numbers are future taxable(deductible amounts)
Equipment 10 (5) 5 5 5
Warranty liability (20) (20) 0 0 0
Deferred compensation liability (15) 0 (5) 0 (10)
Installment receivables 30 10 0 20 0

[wjxhahaha]

bump….anyone can help?

[wjxhahaha]

bump…

[Author]

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