Q3: The Year 3 income statement of Diamond Co. reported income before income taxes of $250,000. During Year 3, estimated tax payments were made out to the IRS, totaling $28,000. Diamond Co.'s Year 2 balance sheet reported a deferred tax liability of $5,000. The following items were included in income under GAAP and were compared to corresponding item sunder tax rules wherever applicable: UNDER UNDER ITEM GAAP TAX LAW Parking ticket violation expenses 7,000 0 Warranty expenses 85,000 20,000 Depreciation expense $45,000 $75,000 Dividends received from 100%-owned investee 49,000 0 Revenue from installment sales $37,000 $52,000 Interest from tax-exempt bonds 18,000 0 In addition, during Year 3, Diamond Co. paid $36,000 for liability insurance for Years 4 and 5 as well as $20,000 in premiums for life insurance on its CEO for which Diamond Co. is the beneficiary: also, during Year 3, a customer paid $40,000 for product to be delivered in Year 4. The applicable tax rate for all years is 30%. INSTRUCTIONS: (Enter answers in the spaces provided below. Anything that is inapplicable should be left blank.) Part 1: Determine for each difference whether it is temporary or permanent, and whether it will give rise to a DTA or a DTL. Part 2: Determine the following for the year ended 12/31, Year 3: A) Taxable income C) Income Taxes payable E) Deferred tax asset or liability to report on the balance sheet B) Current tax expense D) Deferred tax expense or benefit F) Total provision for taxes to report on the income statement PART 1 ITEM AMOUNT AMOUNT INCOME STATEMENT AMOUNT Pretax Financial Income TYPE OF DIFFERENCE WILL GIVE RISE TO... Provision for income taxes Violation Current income tax expense Deferred income tax Warranty Depreciation Dividends Total provision for income taxes Installment Sales BALANCE SHEET Interest Current Liabilities Prepaid Insurance Income Taxes Payable Life insurance premiums Unearned Revenue Non-Current Taxable income Net DT Deferred Tax Q3: The Year 3 income statement of Diamond Co. reported income before income taxes of $250,000. During Year 3, estimated tax payments were made out to the IRS, totaling $28,000. Diamond Co.'s Year 2 balance sheet reported a deferred tax liability of $5,000. The following items were included in income under GAAP and were compared to corresponding item sunder tax rules wherever applicable: UNDER UNDER ITEM GAAP TAX LAW Parking ticket violation expenses 7,000 0 Warranty expenses 85,000 20,000 Depreciation expense $45,000 $75,000 Dividends received from 100%-owned investee 49,000 0 Revenue from installment sales $37,000 $52,000 Interest from tax-exempt bonds 18,000 0 In addition, during Year 3, Diamond Co. paid $36,000 for liability insurance for Years 4 and 5 as well as $20,000 in premiums for life insurance on its CEO for which Diamond Co. is the beneficiary: also, during Year 3, a customer paid $40,000 for product to be delivered in Year 4. The applicable tax rate for all years is 30%. INSTRUCTIONS: (Enter answers in the spaces provided below. Anything that is inapplicable should be left blank.) Part 1: Determine for each difference whether it is temporary or permanent, and whether it will give rise to a DTA or a DTL. Part 2: Determine the following for the year ended 12/31, Year 3: A) Taxable income C) Income Taxes payable E) Deferred tax asset or liability to report on the balance sheet B) Current tax expense D) Deferred tax expense or benefit F) Total provision for taxes to report on the income statement PART 1 ITEM AMOUNT AMOUNT INCOME STATEMENT AMOUNT Pretax Financial Income TYPE OF DIFFERENCE WILL GIVE RISE TO... Provision for income taxes Violation Current income tax expense Deferred income tax Warranty Depreciation Dividends Total provision for income taxes Installment Sales BALANCE SHEET Interest Current Liabilities Prepaid Insurance Income Taxes Payable Life insurance premiums Unearned Revenue Non-Current Taxable income Net DT Deferred Tax