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Calculating Deferred Tax Liability – Examples And Solutions
| Particulars | 2016 | 2017 |
| Pre-tax income | $ 330 | $ 350 |
| Accounting depreciation | $ 20 | $ 20 |
| Taxable income as per accounting | $ 310 | $ 330 |
| Pre-tax income | $ 350 | $ 370 |
| MACRS depreciation | $ 25 | $ 33 |
| Taxable income as per income tax | $ 325 | $ 337 |
| Temporary difference for depreciation | $ 5 | $ 13 |
| Particulars | 2016 | 2017 |
| Temporary difference for depreciation | $ 5 | $ 13 |
| Deferred tax liability/asset | Liability | Liability |
| Amount of deferred tax liability @40% | $ 2 | $ 5.20 |
| Balance in deferred tax liability account | $ 2 | $ 7.20 |
| Particulars | Details | Units |
| Taxable income | A | $ 7,50,00,000 |
| Enacted tax rate | B | 40% |
| Income tax payable | AxB | $ 3,00,00,000 |
| Particulars | Details | Units |
| Warranty liability | A | $ 10,00,000 |
| Enacted tax rate | B | 40% |
| Previous year’s deferred tax asset | C | $ 4,35,000 |
| Deferred tax asset | (AxB)-C | -$ 35,000 |
| Particulars | Details | Units |
| Income tax payable | A | $ 3,00,00,000 |
| Deferred tax asset | B | -$ 35,000 |
| Income tax expense | A-B | $ 3,00,35,000 |
| For the period ended 31 December 2016 | ||
| Date | Particulars | Debit amount |
| 2016 | Income Tax Expense Account………………….Dr | $ 9,50,00,000 |
| Particulars | Details | Units |
| Desired ending balance of deferred tax asset | A | $ 2,80,00,000 |
| Non-realizable portion of deferred tax asset | B=1-1/4 | 75% |
| Valuation allowance | C=AxB | $ 2,10,00,000 |
| Income tax payable | D | $ 7,20,00,000 |
| Deferred tax asset value | E | $ 20,00,000 |
| Income tax expense value | F=C+D+E | $ 9,50,00,000 |
| Operating loss carryback | Rate | |
| Carryback-2012 | 30% | |
| Carryback-2013 | 30% | |
| Carryback-2014 | $ 80,000 | 40% |
| Carryback-2015 | $ 60,000 | 45% |
| Operating loss carryforward | $ 20,000 | 40% |
| Particulars | Current year 2016 | Previous year 2014 |
| Operating loss | $ 1,60,000 | $ 80,000 |
| Taxable amount | $ – | $ 80,000 |
| Enacted tax rate | 40% | 40% |
| Tax payable/refund | $ – | $ 32,000 |