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At December 31, 2013, Belmont Company had a net deferred tax liability of $375,000. An explanation of the items that compose this balance is as
At December 31, 2013, Belmont Company had a net deferred tax liability of $375,000. An explanation of the items that compose this balance is as follows: | |||||||||||
Resulting Balances in Deffered Taxes | |||||||||||
Temporary Differences | |||||||||||
1. Excess of tax depreciation over book Depreciation | 200,000 | ||||||||||
2. Accural, for book purposes, of estimated loss contingency from pending lawsuit that is expected to be settled in 2014. The loss will be deducted on the tax return when paid. | |||||||||||
(50,000) | |||||||||||
3. Accrual method used for book purposes and installment used for tax purposes for an isolated installment sale of an investment. | |||||||||||
225,000 | |||||||||||
Net deferred tax liability | $ 375,000 | ||||||||||
In analyzing the temporary differences, you find that $30,000 of the depreciation temporary differences will reverse | |||||||||||
in 2014, and $120,000 of the temporary difference due to the installment sale will reverse in 2014. The tax rate for all years is 40%. | |||||||||||
Indicate the manner in which deferred taxes should be presented on Belmont Company's December 31, 2013, balance sheet. |
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