[wjxhahaha]

Thorn Co. applies Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. At the end of Year 1, the tax effects of temporary differences were as follows:

Deferred tax assets (liabilities):

Accelerated tax depreciation $ (75,000) Related to Noncurrent asset

Additional costs in inventory for tax purposes 25,000 Related to Current asset

Total $ (50,000)

A valuation allowance was not considered necessary. Thorn anticipates that $10,000 of the deferred tax liability will reverse in Year 2. In Thorn’s December 31, Year 1, balance sheet, what amount should Thorn report as noncurrent deferred tax liability under U.S. GAAP?

The answer is (75)k non current.

---

Why not 65k? since 10k is reversing in yr 2, I thought that is supposed to be our current portion liability

[Biff-1955-Tannen]

I think because it is related to a long term asset, it is classified as a noncurrent liability, regardless of if a portion is current.

“The classification of the deferred tax account is based on the classification of the item giving rise to it.
1. If a temporary difference is related to a current liability or asset, then the associated deferred tax account is also classified as current.
2. If a temporary difference is related to a noncurrent liability or asset, then the associated deferred tax account is also classified as concurrent.”

“For some items, the future temporary difference is not associated with a specific balance sheet account. For these items, the classification of the deferred tax account is based on the expected period of reversal. For the portion expected to reverse in the year following the current year, the deferred tax account is classified as current. Otherwise the classification is concurrent.”

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[wjxhahaha]

@Biff-1955-Tannen
Thank you! That makes sense

[wjxhahaha]

@Biff-1955-Tannen
Thank you! That makes sense

[Author]

Replies