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At December 31,2006, DePaul Corporation had a $16 millionn balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:
1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $120 million: straight-line on the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Bad debt expense, $25 million: allowance method for accounting; direce write-off for tax purposes.
Required:
Show how any deferred tax amounts should be classified and reported on the 2006 balance sheet. The tax rate is 40%.
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repayments of long-term borrowings of $3.5 million, interest payments of $780,000, repurchase of treasury shares of $500,000 and cash dividends declared of $1.1 million. Net cash flow from financing activities equals.
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