Could someone please help with this?
I thought all deferred tax asset/liability should be non current. Why is the answer not 50,000?
When do we need to classify DTA or DTL by its related asset classification? I don't think Becker talked about this in the material…
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) Related asset classification
Accelerated tax depreciation $ (75,000) Noncurrent asset
Additional costs in inventory for tax purposes 25,000 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?
a. $65,000
b. $75,000
c. $40,000
d. $50,000
Explanation
Choice “b” is correct, $75,000 noncurrent deferred tax liability (based on classification of related asset as noncurrent).
Thank you!!!
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