Balance sheet classification
Response to the following problem:
At December 31, DePaul Corporation had a $16 million balance in its deferred tax asset account and a $68 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences:
1. Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
2. Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.
3. Income from installment sales of properties, $50 million: income recorded in the year of the sale; taxable when received equally over the next five years.
4. Rent revenue collected in advance, $25 million; taxable in the year collected; recorded as income when earned the following year.
Required:
Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.