Problem 19-8

The following information was disclosed during the audit of Oriole Inc.

Year Amount Due per Tax Return

2017 $135,600

2018 $100,300

1. On January 1, 2017, equipment costing $579,000is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint:For tax purposes, the half-year convention as discussed inAppendix 11Amust be used.)
2. In January 2018, $223,500is collected in advance rental of a building for a 3-year period. The entire $223,500is reported as taxable income in 2018, but $149,000of the $223,500is reported as unearned revenue in 2018 for financial reporting purposes. The remaining amount of unearned revenue is to be recognized equally in 2019 and 2020.T
3. The tax rate is40% in 2017 and all subsequent periods. (Hint:To find taxable income in 2017 and 2018, the related income taxes payable amounts will have to be "grossed up.")
4. No temporary differences existed at the end of 2016. Oriole expects to report taxable income in each of the next 5 years.

A) Determine the amount to report for deferred income taxes at the end of 2017, and indicate how it should be classified on the balance sheet.

The amount to report for deferred income taxes