E19-11B (Three Differences, Classify Deferred Taxes)At December 31, 2014, Rockfellow Corp. had a net deferred tax asset of $50,000. An explanation of the items that compose this balance is as follows. Resulting Balances Temporary Differences in Deferred T

E19-11B (Three Differences, Classify Deferred Taxes)At December 31, 2014, Rockfellow Corp. had a net deferred tax asset of $50,000. An explanation of the items that compose this balance is as follows.

                                                                                                                                                       Resulting Balances

                                  Temporary Differences                                                                             in Deferred Taxes

1. Accrual, for book purposes, of estimated warranty costs. 

Warranty costs will be deducted on the tax return when paid.                                                   $ 125,000

2. Excess of tax depreciation over book depreciation                                                                  (110,000) 

3. Accrual, for book purposes, of an estimated litigation

settlement expected to be paid in 2016. The loss will

be deducted for tax purposes when paid.                                                                                         35,000 

                                                                                                                                                               $ 50,000 

In analyzing the temporary differences, you find that $30,000 of the depreciation temporary difference will reverse in 2015, and $100,000 of the temporary difference due to the warranty costs will reverse in 2015. The tax rate for all years is 40%.

Instructions

Indicate the manner in which deferred taxes should be presented on Rockfellow’s December 31, 2014, balance sheet.