Part 1 Peterman Corporation uses different depreciation methods for accounting and tax purposes, which result in a $60,000 cumulative temporary difference at December 31, year 4. This temporary difference will reverse equally over the next 5 years. Taxable income for year 4 is $46,000. Peterman?s balance sheet at December 31, year 3, reported a net deferred tax liability of $8,000 (noncurrent deferred tax liability of $28,000 and a noncurrent deferred tax asset of $20,000). Peterman expects taxable income in all future years. At December 31, year 4, Peterman has a $17,000 liability reported because of the accrual of estimated litigation claims. Peterman expects to pay the claims and have tax deductible amounts in year 8 of $15,000, and in year 9 of $2,000. The enacted tax rates as of the beginning of year 3 are as follows: 50% in years 3 to 5; 40% in years 6 to 7; and 30% in year 8 and later years. Required: 1. Calculate the amount of net deferred taxes that should be reported on Peterman?s balance sheet at December 31, year 4 and indicate whether the net amount is an asset or liability. 2. Prepare the journal entry for Peterman to record income taxes for year 4.
Paper#12979 | Written in 18-Jul-2015Price : $25