Submariner
New member
- Mar 4, 2014
- 0
- 0
We’re given the following table:
Deferred tax assets:
Accrued expenses
$8,613
$7,927
Tax credit and net operating loss carryforwards
2,288
2,554
LIFO and inventory reserves
5,286
4,327
Other
2,664
2,109
Deferred tax assets
18,851
16,917
Valuation allowance
(1,245)
(1,360)
Net deferred tax assets
$17,606
$15,557
Deferred tax liabilities:
Depreciation and amortization
$(27,338)
$(29,313)
Compensation and retirement plans
(3,831)
(8,963)
Other
(1,470)
(764)
Deferred tax liabilities
(32,639)
(39,040)
Net deferred tax liability
($15,033)
($23,483)
The problem asks about income tax expense vs. cash tax payments for 2007 and which were higher.
The answer is that cash tax payments were higher because since 2006, the DTL has decreased. I cannot help but think this is incorrect, because they are still running a net DTL for 2007, so wouldn’t their income tax expense be greater than their actual taxes paid?
Thanks!
Deferred tax assets:
Accrued expenses
$8,613
$7,927
Tax credit and net operating loss carryforwards
2,288
2,554
LIFO and inventory reserves
5,286
4,327
Other
2,664
2,109
Deferred tax assets
18,851
16,917
Valuation allowance
(1,245)
(1,360)
Net deferred tax assets
$17,606
$15,557
Deferred tax liabilities:
Depreciation and amortization
$(27,338)
$(29,313)
Compensation and retirement plans
(3,831)
(8,963)
Other
(1,470)
(764)
Deferred tax liabilities
(32,639)
(39,040)
Net deferred tax liability
($15,033)
($23,483)
The problem asks about income tax expense vs. cash tax payments for 2007 and which were higher.
The answer is that cash tax payments were higher because since 2006, the DTL has decreased. I cannot help but think this is incorrect, because they are still running a net DTL for 2007, so wouldn’t their income tax expense be greater than their actual taxes paid?
Thanks!