building
book value
$600,000
tax basis
$450,000
begin
$25,000
difference
$150,000
changes
$12,500
tax consequence
$37,500
end
$37,500
taxable income
$6,000,000
tax rate
25%
deferred tax liability
$25,000
building
book value
$760,000
tax basis
$570,000
begin
$29,000
difference
$190,000
changes
$18,500
tax consequence
$47,500
end
$47,500
taxable income
$4,000,000
tax rate
25%
deferred tax liability
$29,000
Deferred tax liability
Deferred tax liability
Tax payable
$1,500,000
income tax expense
deferred tax liability end balance
$37,500
deferred tax liability
deferred tax liability change
$12,500
income tax payable
tax expense plug
$1,512,500
Tax payable
$1,000,000
income tax expense
deferred tax liability end balance
$47,500
deferred tax liability
deferred tax liability change
$18,500
income tax payable
tax expense plug
$1,018,500
$1,512,500
$12,500
$1,500,000
$1,018,500
$18,500
$1,000,000
equipment
$540,000
current year
useful life
4
pretax accounting income
$640,000
Permanent difference:
tax deductions
40%
governmental bond interest
($12,000)
30%
Temporary difference:
20%
depreciation
($81,000)
10%
taxable income
$547,000
enacted tax rate
25%
pretax accounting income
$640,000
tax payable
$136,750
interest revenue
$12,000
deferred tax liability
enacted tax rate
25%
equipment
$580,000
current year
useful life
4
pretax accounting income
$680,000
Permanent difference:
tax deductions
40%
governmental bond interest
($14,000)
30%
Temporary difference:
20%
depreciation
($87,000)
10%
taxable income
$579,000
enacted tax rate
25%
pretax accounting income
$680,000
tax payable
$144,750
interest revenue
$14,000
deferred tax liability
enacted tax rate
25%
future taxable amount
begin
-
$
change
$20,250
end
$20,250
$81,000
tax depreciation
$216,000
straight-line depreciation
$135,000
25%
difference
$81,000
$20,250
tax payable
$136,750
deferred tax liability end
$20,250
deferred tax liability change
$20,250
tax expense plug
$157,000
future taxable amount
begin
-
$
change
$21,750
end
$21,750
$87,000
tax depreciation
$232,000
straight-line depreciation
$145,000
25%
difference
$87,000
$21,750
tax payable
$144,750
deferred tax liability end
$21,750
deferred tax liability change
$21,750
tax expense plug
$166,500
deferred tax liablilty
deferred tax liablilty
income tax expense
$157,000
deferred tax liability
$20,250
income tax payable
$136,750
income tax expense
$166,500
deferred tax liability
$21,750
income tax payable
$144,750
NOL
$30,000,000
2Y
use
$25,000,000
NOL
left
$5,000,000
taxable income LY
$30,000,000
LY
use
$5,000,000
taxable income 2Y
$25,000,000
enacted tax rate
25%
Total
$30,000,000
tax received
$7,500,000
allowed carryback
NOL
$20,000,000
2Y
use
$16,000,000
NOL
left
$4,000,000
taxable income LY
$21,000,000
LY
use
$4,000,000
taxable income 2Y
$16,000,000
enacted tax rate
25%
Total
$20,000,000
tax received
$5,000,000
allowed carryback
receivable-income tax refund
$7,500,000
income tax expense
$7,500,000
receivable-income tax refund
$5,000,000
income tax expense
$5,000,000
pretax earnings
$80,000,000
income from discontinued operations
$15,000,000
company's tax rate
25%
income from continuing operations before tax
$65,000,000
income tax expense
($16,250,000)
income from continuing operations
$48,750,000
income from discontinued operations
$11,250,000
net income
$60,000,000
pretax earnings
$70,000,000
income from discontinued operations
$15,000,000
company's tax rate
25%
income from continuing operations before tax
$55,000,000
income tax expense
($13,750,000)
income from continuing operations
$41,250,000
income from discontinued operations
$11,250,000
net income
$52,500,000
warranty liability
$2,000,000
31-Dec
Income tax expense
taxable income
$80,000,000
Deferred tax asset
deferred tax asset
$449,000
Income tax payable
enacted tax rate
25%
Deferred tax asset
begin
$449,000
change
$51,000
end
$500,000
warranty liability
$2,000,000
31-Dec
Income tax expense
taxable income
$85,000,000
Deferred tax asset
deferred tax asset
$439,000
Income tax payable
enacted tax rate
25%
Deferred tax asset
begin
$439,000
change
$61,000
end
$500,000
$19,949,000
$51,000
$20,000,000
$21,189,000
$61,000
$21,250,000
delivery truck
$40,000
1
amount
x
tax rate
useful life
4
pretax accounting income
$480,000
permanent difference
($64,000)
for taxes
40%
income subject to taxation
$416,000
x
25%
=
30%
temporary difference
($6,000)
x
25%
=
30%
income taxable in current year
$410,000
x
25%
=
pretax accounting income
$480,000
interest revenue
$64,000
3
enacted tax rate
25%
pretax accounting income
$480,000
income tax expense
$104,000
net income
$376,000
delivery truck
$40,000
1
amount
x
tax rate
useful life
4
pretax accounting income
$380,000
permanent difference
($44,000)
for taxes
50%
income subject to taxation
$336,000
x
25%
=
30%
temporary difference
($10,000)
x
25%
=
20%
income taxable in current year
$326,000
x
25%
=
pretax accounting income
$380,000
interest revenue
$44,000
3
enacted tax rate
25%
pretax accounting income
$380,000
income tax expense
$84,000
net income
$296,000
tax
recorded as
Depreciation
year 1
year 2
year 3
pretax
($10,000)
($10,000)
($10,000)
tax deduction
($16,000)
($12,000)
($12,000)
$104,000
income tax expense
temporary difference
($6,000)
($2,000)
($2,000)
($1,500)
deferred tax liability
$102,500
income tax payable
Deferred tax liability
begin
$0
changes
$1,500
end
$1,500
tax
recorded as
Depreciation
year 1
year 2
year 3
pretax
($10,000)
($10,000)
($10,000)
tax deduction
($20,000)
($12,000)
($8,000)
$84,000
income tax expense
temporary difference
($10,000)
($2,000)
$2,000
($2,500)
deferred tax liability
$81,500
income tax payable
Deferred tax liability
begin
$0
changes
$2,500
end
$2,500
year 4
total
2
income tax expense
$104,000
($10,000)
($40,000)
income tax payable
0
($40,000)
deferred tax liability
$10,000
year 4
total
2
income tax expense
$84,000
($10,000)
($40,000)
income tax payable
0
($40,000)
deferred tax liability
$10,000
$102,500
$1,500
$81,500
$2,500
31-Dec-24
temporary differences
depreciation
$52,000
prepaid expenses
$22,000
warranty expenses
($19,000)
$74,000
$19,000
tax rate
25%
31-Dec-24
temporary differences
depreciation
$44,000
prepaid expenses
$18,000
warranty expenses
($15,000)
$62,000
$15,000
tax rate
25%
No temporary differences existed at beginning of 2024
pretax accounting income
taxable income
No temporary differences existed at beginning of 2024
pretax accounting income
taxable income
Amount
x
tax rate
=
tax
recorded as
pretax accounting income
$74,000
permanent differences
no permanent differences
0
income subject to taxation
$74,000
x
25%
=
$18,500
income tax expense
temporary differences
Depreciation
($52,000)
x
25%
=
($13,000)
deferred tax liability
prepaid expenses
($22,000)
x
25%
=
($5,500)
deferred tax liability
warranty expenses
$19,000
x
25%
=
$4,750
deferred tax asset
income taxable in current year
$19,000
x
25%
=
$4,750
income tax payable
Amount
x
tax rate
=
tax
recorded as
pretax accounting income
$62,000
permanent differences
no permanent differences
0
income subject to taxation
$62,000
x
25%
=
$15,500
income tax expense
temporary differences
Depreciation
($44,000)
x
25%
=
($11,000)
deferred tax liability
prepaid expenses
($18,000)
x
25%
=
($4,500)
deferred tax liability
warranty expenses
$15,000
x
25%
=
$3,750
deferred tax asset
income taxable in current year
$15,000
x
25%
=
$3,750
income tax payable
income tax expense
18,500.00
$
begin
-
$
deferred tax asset
4,750.00
$
changes
18,500.00
$
deferred tax liability
end
18,500.00
$
income tax payable
begin
-
$
changes
4,750.00
$
end
4,750.00
$
income tax expense
15,500.00
$
begin
-
$
deferred tax asset
3,750.00
$
changes
15,500.00
$
deferred tax liability
end
15,500.00
$
income tax payable
begin
-
$
changes
3,750.00
$
end
3,750.00
$
deferred tax liability
deferred tax asset
deferred tax liability
deferred tax asset
18,500.00
$
$4,750
15,500.00
$
$3,750
income from installment sales
$9,000,000
installment receivable
$10,000,000
expected to collected equally in 2025 and 2026
assessed penalty
$3,000,000
paid equally in 2024 and 2025
asset
$116,000,000
useful life
4
warranty expense
$1,000,000
2023
$5,000,000
2024
$3,000,000
2025 anticipated costs
$3,000,000
warranty liability
liability for estimated future absences
$15,000,000
$10,000,000
2025
$5,000,000
2026
loss contigency
$6,000,000
2023 accrued, 2024 paid
deferred tax asset
$1,750,000
deferred tax liability
$2,500,000
enacted tax rate
25%
income from installment sales
$4,000,000
installment receivable
$6,000,000
expected to collected equally in 2025 and 2026
assessed penalty
$4,000,000
paid equally in 2024 and 2025
asset
$116,000,000
useful life
4
warranty expense
$1,000,000
2023 warranty liability
$5,000,000
2024 recognized
$3,000,000
2024 paid
$3,000,000
2025 anticipated costs
$3,000,000
2024 warranty liability
liability for estimated future absences
$12,000,000
$10,000,000
2025
$2,000,000
2026
loss contigency
$2,000,000
2023 accrued, 2024 paid
deferred tax asset
$750,000
deferred tax liability
$2,500,000
enacted tax rate
25%
income statement
tax return
Difference
2023
$29,000,000
$38,000,000
($9,000,000)
2024
$29,000,000
$50,000,000
($21,000,000)
2025
$29,000,000
$20,000,000
$9,000,000
2026
$29,000,000
$8,000,000
$21,000,000
Total
$116,000,000
$116,000,000
$0
step 1
step 2
step 3
step 4
income statement
tax return
Difference
2023
$27,000,000
$35,000,000
($8,000,000)
2024
$27,000,000
$48,000,000
($21,000,000)
2025
$27,000,000
$18,000,000
$9,000,000
2026
$27,000,000
$7,000,000
$20,000,000
Total
$108,000,000
$108,000,000
$0
step 1
step 2
step 3
step 4
2024
2025
2026
future taxable
pretax accounting income
$98,000,000
federal fine not deductible
$3,000,000
installment sales
($9,000,000)
$5,000,000
$5,000,000
$10,000,000
depreciation
($21,000,000)
$9,000,000
$21,000,000
$30,000,000
warranties
$2,000,000
($3,000,000)
paid future absences
$15,000,000
($10,000,000)
($5,000,000)
loss contigency
($6,000,000)
taxable income
$82,000,000
$40,000,000
enacted tax rate
25%
25%
tax payable
$20,500,000
deferred tax liability
$10,000,000
deferred tax asset
begin
$2,500,000
change
$7,500,000
end
$10,000,000
begin
$1,750,000
change
$2,750,000
end
$4,500,000
tax payable
$20,500,000
deferred tax asset end
$4,500,000
deferred tax liability end
$10,000,000
deferred tax asset change
$2,750,000
deferred tax liability change
$7,500,000
tax expense plug
$25,250,000
income before income tax
$98,000,000
income tax expense
$25,250,000
net income
$72,750,000
net noncurrent deferred tax liability
$5,500,000
2024
2025
2026
future taxable
pretax accounting income
$94,000,000
federal fine not deductible
$4,000,000
installment sales
($4,000,000)
$3,000,000
$3,000,000
$6,000,000
depreciation
($21,000,000)
$9,000,000
$20,000,000
$29,000,000
warranties
$2,000,000
($3,000,000)
paid future absences
$12,000,000
($10,000,000)
($2,000,000)
loss contigency
($2,000,000)
taxable income
$85,000,000
deferred tax liability
deferred tax asset
$35,000,000
enacted tax rate
25%
25%
tax payable
$21,250,000
deferred tax liability
$8,750,000
deferred tax asset
begin
$2,500,000
change
$6,250,000
end
$8,750,000
begin
$750,000
change
$3,000,000
end
$3,750,000
tax payable
$21,250,000
deferred tax asset end
$3,750,000
deferred tax liability end
$8,750,000
deferred tax asset change
$3,000,000
deferred tax liability change
$6,250,000
tax expense plug
$24,500,000
income before income tax
$94,000,000
income tax expense
$24,500,000
net income
$69,500,000
net noncurrent deferred tax liability
$5,000,000
deferred tax liability
deferred tax asset
future deductible
income tax payable
$25,250,000
deferred tax asset
$2,750,000
deferred tax liability
$7,500,000
income tax payable
$20,500,000
($3,000,000)
($15,000,000)
-$18,000,000
25%
-$4,500,000.00
future deductible
income tax payable
$24,500,000
deferred tax asset
$3,000,000
deferred tax liability
$6,250,000
income tax payable
$21,250,000
($3,000,000)
($12,000,000)
-$15,000,000
25%
-$3,750,000.00
taxable income
$168,000,000
carrying amount
tax basis
assets
current
net accounts receivable
$56,000,000
$60,000,000
prepaid insurance
$68,000,000
prepaid advertising
$52,000,000
noncurrent
investments in equity securities(FV)
$52,000,000
buildings and equipment(net)
$408,000,000
$328,000,000
liabilities
current
deferred subscription revenue
$60,000,000
long-term
liability-compensated future absences
$642,000,000
deferred tax asset
$180,250,000
deferred tax liabilities
$25,000,000
enacted tax rate
25%
step 1
step 2
step 3
step 4
taxable income
$176,000,000
carrying amount
tax basis
assets
current
net accounts receivable
$64,000,000
$68,000,000
prepaid insurance
$76,000,000
prepaid advertising
$60,000,000
noncurrent
investments in equity securities(FV)
$60,000,000
buildings and equipment(net)
$416,000,000
$336,000,000
liabilities
current
deferred subscription revenue
$68,000,000
long-term
liability-compensated future absences
$650,000,000
deferred tax asset
$184,250,000
deferred tax liabilities
$25,000,000
enacted tax rate
25%
step 1
step 2
step 3
step 4
temporary difference
future taxable
future deductible
net accounts receivable
($4,000,000)
prepaid insurance
$68,000,000
prepaid advertising
$52,000,000
investment in equity securities
$52,000,000
buildings and equipment
$80,000,000
deferred subscripton revenue
($60,000,000)
liability-cpmensated future absences
($642,000,000)
totals
252,000,000
$
($706,000,000)
tax rate
25%
25%
deferred tax liability
63,000,000
$
deferred tax asset
($176,500,000)
begin
$25,000,000
changes
$38,000,000
end
63,000,000
$
deferred tax asset
begin
$180,250,000
changes
$3,750,000
end
$176,500,000
tax payable
$42,000,000
deferred tax asset end
$176,500,000
deferred tax liability end
63,000,000
$
deferred tax asset change
($3,750,000)
deferred tax liability change
$38,000,000
tax expense plug
$83,750,000
temporary difference
future taxable
future deductible
net accounts receivable
($4,000,000)
prepaid insurance
$76,000,000
prepaid advertising
$60,000,000
investment in equity securities
$60,000,000
buildings and equipment
$80,000,000
deferred subscripton revenue
($68,000,000)
liability-cpmensated future absences
($650,000,000)
totals
276,000,000
$
($722,000,000)
tax rate
25%
25%
deferred tax liability
69,000,000
$
deferred tax asset
($180,500,000)
begin
$25,000,000
changes
$44,000,000
end
69,000,000
$
deferred tax liability
deferred tax liability
deferred tax asset
begin
$184,250,000
changes
$3,750,000
end
$180,500,000
tax payable
$44,000,000
deferred tax asset end
$180,500,000
deferred tax liability end
69,000,000
$
deferred tax asset change
($3,750,000)
deferred tax liability change
$44,000,000
tax expense plug
$91,750,000
income tax payable
$83,750,000
deferred tax asset
$3,750,000
deferred tax liability
$38,000,000
income tax payable
$42,000,000
income tax payable
$91,750,000
deferred tax asset
$3,750,000
deferred tax liability
$44,000,000
income tax payable
$44,000,000
pretax operating loss
$184,000,000
penalty by EPA
$4,000,000
paid 2024
accruing loss contingency
$20,000,000
deductible in 2025
enacted tax rate
25%
taxable income
2022
$84,000,000
2023
$60,000,000
pretax accounting income
$216,000,000
2025
pretax operating loss
$168,000,000
penalty by EPA
$4,000,000
paid 2024
accruing loss contingency
$20,000,000
deductible in 2025
enacted tax rate
25%
taxable income
2022
$76,000,000
2023
$52,000,000
pretax accounting income
$200,000,000
2025
2022
2023
2024
future deductible
accounting loss
($184,000,000)
federal fine not deductible
$4,000,000
loss contingency
$20,000,000
($20,000,000)
taxable loss
($160,000,000)
NOL carryback
($84,000,000)
($60,000,000)
$144,000,000
NOL carryforward
$16,000,000
($16,000,000)
$0
($36,000,000)
enacted tax rate
25%
25%
25%
25%
tax payable
($21,000,000)
($15,000,000)
$0
deferred tax asset
($9,000,000)
operating loss before income taxes
($184,000,000)
income tax benefit:
tax refund from NOL carryback
$36,000,000
tax savings from NOL carryforward
$9,000,000
$45,000,000
net loss
($139,000,000)
2025
future
pretax accounting income
$216,000,000
loss contigency
($20,000,000)
NOL carryforward
($16,000,000)
taxable income
$180,000,000
-
$
enacted tax rate
25%
25%
tax payable
$45,000,000
deferred tax asset
-
$
2022
2023
2024
future deductible
accounting loss
($168,000,000)
federal fine not deductible
$4,000,000
loss contingency
$20,000,000
($20,000,000)
taxable loss
($144,000,000)
NOL carryback
($76,000,000)
($52,000,000)
$128,000,000
NOL carryforward
$16,000,000
($16,000,000)
$0
($36,000,000)
enacted tax rate
25%
25%
25%
25%
tax payable
($19,000,000)
($13,000,000)
$0
deferred tax asset
($9,000,000)
operating loss before income taxes
($168,000,000)
income tax benefit:
tax refund from NOL carryback
$32,000,000
tax savings from NOL carryforward
$9,000,000
$41,000,000
net loss
($127,000,000)
2025
future
pretax accounting income
$200,000,000
loss contigency
($20,000,000)
NOL carryforward
($16,000,000)
taxable income
$164,000,000
-
$
enacted tax rate
25%
25%
tax payable
$41,000,000
deferred tax asset
-
$
begin
-
$
changes
$9,000,000
end
$9,000,000
step 1
tax payable
($36,000,000)
step 2
deferred tax asset end
$9,000,000
step 3
deferred tax asset change
$9,000,000
step 4
tax expense plug
$45,000,000
deferred tax asset
begin
$9,000,000
changes
$9,000,000
end
-
$
step 1
tax payable
$45,000,000
step 2
deferred tax asset end
$0
step 3
deferred tax asset change
($9,000,000)
step 4
tax expense plug
($54,000,000)
begin
-
$
changes
$9,000,000
end
$9,000,000
step 1
tax payable
($36,000,000)
step 2
deferred tax asset end
$9,000,000
step 3
deferred tax asset change
$9,000,000
step 4
tax expense plug
$45,000,000
deferred tax asset
deferred tax asset
deferred tax asset
begin
$9,000,000
changes
$9,000,000
end
-
$
step 1
tax payable
$41,000,000
step 2
deferred tax asset end
$0
step 3
deferred tax asset change
($9,000,000)
step 4
tax expense plug
($50,000,000)
receivable-income tax payable
$36,000,000
deferred tax asset
$9,000,000
income tax expense
$45,000,000
income tax expense
$54,000,000
deferred tax asset
$9,000,000
income tax payable
$45,000,000
receivable-income tax payable
$32,000,000
deferred tax asset
$9,000,000
income tax expense
$41,000,000
income tax expense
$50,000,000
deferred tax asset
$9,000,000
income tax payable
$41,000,000
tru, inc provision for income tax
lower
did tru, inc deferred tax liability appear to benefit from the Tax Act?
yes
effective tax rate for GPS in 2017
35%
effective tax rate for GPS in 2018
21%
