Problem
DePaul Corporation - Balance sheet classification
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:
• Estimated warranty expense, $15 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty).
• Depreciation expense, $120 million: straight-line in the income statement; MACRS on the tax return.
• 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.
• Bad debt expense, $25 million: allowance method for accounting; direct write-off for tax purposes.
Task
• Show how any deferred tax amounts should be classified and reported in the December 31 balance sheet. The tax rate is 40%.
The response must include a reference list. Using Times New Roman 12 pnt font, double-space, one-inch margins, and APA style of writing and citatios.