Tax, DTA, DTL

As u might have noticed I’m reviewing the Q that I found difficult from FSA hope u like that one too (also I would use some clarification. Thanks) In 2000, Taylor Company received $240,000 rent in advance. For income tax purposes, all of the $240,000 was included in taxable income. However, for financial reporting purposes, only $60,000 was included in the pretax financial income. The tax effects of the $180,000 difference would affect income tax liability, the deferred tax asset, and the deferred tax liability, respectively, in the following ways for 2000: A. increase, increase, no effect B. no effect, increase, no effect C. increase, no effect, increase D. no effect, no effect, increase

should be C, although I am not very good with taxes

I would say C as well

B

yeah I know, I got it wrong too … :frowning:

So the entire revenue was included for taxes, that increases taxes in the present period, creating a DTA. DTA then is deducted from taxes payables, having no effect on the income tax liability. No DTL is created. This should be B.

A or B … What is income Tax liability ??

the income tax expense = taxes payable +DTL-DTA

WOOOOW MAP GOT IT WRONG TOO !!! (not that I have something against u, just that I got tricked too)

Thats correct map. you mean income tax liability=income tax expense or taxes payable ??

when deferred tax comes from profit differences >> affect the DTA when deferred tax comes from loss differences >> affect the DTL

so…which one is it?

so what is the correct anwser then d’Artagnan???

:smiley: if there would be information about future tax rate different than the current tax rate, I would say it should be A. So, what’s the answer?:smiley:

Income tax liability = taxes payable, the answer should be A. my wrong! thunderanalyst Wrote: ------------------------------------------------------- > Thats correct map. you mean income tax > liability=income tax expense or taxes payable ??

thanks map. whats the final ans D’artangan

current taxable income > current Pretax Income (expect to reverse in future) hence you create a DTA today so DTA goes up No effect on DTL income tax liability unaffected cuz as DTA reverses you’ll be paying it later on. so D? is that teh answer

pepp Wrote: ------------------------------------------------------- > current taxable income > current Pretax Income > (expect to reverse in future) hence you create a > DTA today so DTA goes up > > No effect on DTL > > income tax liability unaffected cuz as DTA > reverses you’ll be paying it later on. > > so D? is that teh answer after review this seems correct, im going with you pepp

sorry I was busy struggling (and drawning) with another one anyway stalla’s answer is A Current taxable income is greater than current financial income. This recognition of revenue for tax purposes before financial purposes will result in a deferred tax asset being recognized. The income tax liability will increase because taxable income is greater. There is no effect on a deferred tax liability.

getterdone Wrote: ------------------------------------------------------- > pepp Wrote: > -------------------------------------------------- > ----- > > current taxable income > current Pretax Income > > (expect to reverse in future) hence you create > a > > DTA today so DTA goes up > > > > No effect on DTL > > > > income tax liability unaffected cuz as DTA > > reverses you’ll be paying it later on. > > > > so D? is that teh answer > > after review this seems correct, im going with you > pepp ouch!! i am so stupid, i am saying for current year Income tax liability > pretax income, still end up picking up something else. i am going to kill myself.