Taxable Income, Current Income Tax Expense, Deferred Income Tax Calculation


Snarley Corp. had the following balances in selected accounts as of January 1, 2013:
Accrued Warranty Liability            1,500 credit
Accumulated Depreciation        225,000 credit
Deferred Tax Asset – AWL            ?
Deferred Tax Asset – NOL c/f        9,620 debit
Valuation Allowance – NOL            2,960 credit
Deferred Tax Liability – Cap. Assets      61,050 credit

During 2013, the following events occurred:

-    Warranty expense was 11,500 and actual cash outlays for warranty work were 11,000
-    Depreciation of $45,000 was taken. Snarley took a MACRS deduction of only $22,000 in 2013 to help use up its NOL carry forward.  
-    Snarley reported a loss (before tax) of $6,000 on its income statement, which included a fine of $1,000 for violating campaign contribution laws in the state of Indiana, a life insurance premium of $1,000 on its CEO and president Rush Limber, and interest income of $500 on municipal bonds from Bloomington, Indiana.
-    The tax rate was increased to 38% for all tax years beginning in 2014.  It remained at its old rate of 37% for 2013.

Calculate taxable income, current income tax expense, deferred income tax expense, and the ending balances in the deferred tax accounts and valuation allowances.  Should any net operating loss carry forward remain after 2013, Snarley management believes that half of it will be utilized before the end of the remaining carry forward period.  Show the journal entry needed to record all income tax items.

Also, show the income statement for Snarley beginning with net income before tax, explicitly showing the use of the NOL carry forward.  Calculate the cumulative amounts for accumulated depreciation and marcs as of the end of 2013 (no assets were bought or sold during the year).


The question belongs to Finance and it is about calculating the taxable income, current income tax expense, deferred income tax expense and ending balances in deferred tax accounts and valuation allowances. These and the carry forwarded income tax has been calculated in the solution.

Total Word Count 482

Download Full Solution


  • HWA

    this is a very good website

  • HWA

    I have 50 questions for the same test your page is showing only 28

  • HWA

    hi can you please help or guide me to answer my assignments. thanks

  • HWA

    hi can anyone help or guide me to my assignments. thanks

  • HWA

  • HWA

    This solution is perfect ...thanks

  • HWA

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA

    Perfect bank of solution. 

  • HWA

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA

    works fine.