Maria Rodriquez and Lynette Kingston are discussing accounting for income taxes. They are currently studying a schedule of taxable and deductible amounts that will arise in the future as a result of existing temporary differences. The schedule is as follows.

Instructions

a. Explain the concept of future taxable amounts and future deductible amounts as illustrated in the schedule.

b. How does the carryforward provision affect the reporting of deferred tax assets and deferred tax liabilities?

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Future Years 2022 2020 2021 2023 2024 Taxable income $850,000 Taxable amounts Deductible amounts Enacted tax rate $375,000 $375,000 $375,000 (2,400,000) 35% 30% 40% 45% 50%