SSI uses the future income taxes method of accounting for income taxes. The company reports future income
Question:
SSI uses the future income taxes method of accounting for income taxes. The company reports future income tax expense for temporary differences arising from property, plant, and equipment; deferred development costs; and warranty liabilities.
As of December 31, 2022, a future income tax liability of $230,000 was reported for property, plant, and equipment; a $100,000 future income tax liability was reported for the deferred development costs; and a future income tax asset of $40,000 was reported related to the warranty liability.
These were determined using SSI's 20% tax rate.
During 2023, the following changes occurred with respect to the temporary differences:
Capital cost allowance claimed was $30,000 greater than depreciation expense recorded for accounting.
Deferred development costs capitalized exceeded amortization of deferred development costs by $20,000.
Warranty expense was greater than warranty claims paid by $40,000. SSI's tax rate is unchanged.
Explain how the changes will impact the future income tax assets, liabilities, and expense for the 2023 financial statements. Calculate the revised future income tax asset/liability.