Income from installment sales of properties

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Reference no: EM131003627

At December 31, DePaul Corporation had a $16 million 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 in 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; direct write-off for tax purposes.

Required:

Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.

Reference no: EM131003627

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