We’re given the following table:
Deferred tax assets: Accrued expenses $8,613 $7,927 Tax credit and net operating loss carryforwards 2,288 2,554 LIFO and inventory reserves 5,286 4,327 Other 2,664 2,109 Deferred tax assets 18,851 16,917 Valuation allowance (1,245) (1,360) Net deferred tax assets $17,606 15,557 Deferred tax liabilities: Depreciation and amortization (27,338) $(29,313) Compensation and retirement plans (3,831) (8,963) Other (1,470) (764) Deferred tax liabilities (32,639) (39,040) Net deferred tax liability ($15,033) ($23,483)
The problem asks about income tax expense vs. cash tax payments for 2007 and which were higher. The answer is that cash tax payments were higher because since 2006, the DTL has decreased. I cannot help but think this is incorrect, because they are still running a net DTL for 2007, so wouldn’t their income tax expense be greater than their actual taxes paid? Thanks!