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Copyright McGraw-Hill Education. Permission required for reproduction or display. Item Depreciation expense Gain on fixed asset disposition Bad debt expense Warranty expense Deferred compensation (1)
Copyright McGraw-Hill Education. Permission required for reproduction or display. Item Depreciation expense Gain on fixed asset disposition Bad debt expense Warranty expense Deferred compensation (1) Books (Dr) Cr $(2,400,000) 54,000 (165,000) (580,000) (300,000) Tax (Dr) Cr $(3,100,000) 70,000 (95,000) (410,000) (450,000) (2) - (1) Difference (Favorable) Unfavorable $(700,000) 16,000 70,000 170,000 (150,000) 3. What is the additional tax due to the unfavorable book/tax difference on the gain? Show work. 4. Deferred compensation is typically an unfavorable book/tax difference. Explain why and how, preferably with a numeric example
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