Question

At the end of Year 6, the tax effects of temporary differences reported in Apple Company's year-end financial statements were as follows:

Deferredtax assets(liabilites)Accelerated tax depreciation$(120,000)Warranty expense80,000NOL carryforward200,000 $160,000
A valuation allowance was not considered necessary. Apple anticipates that $40,000 of the deferred tax liability will reverse in Year 7, that actual warranty costs will be incurred evenly in Year 8 and Year 9, and that the NOL carryforward will be used in Year 7. On Apple's December 31, Year 6 balance sheet, what amount should be reported as a non-current deferred tax asset under U.S. GAAP?

Answer 1

Based on the given information, the non-current deferred tax asset reported on Apple's December 31, Year 6 balance sheet under U.S. GAAP would be $160,000.

Step-by-step explanation:

Under U.S. GAAP, a non-current deferred tax asset is reported for the portion of deferred tax assets that are not expected to be realized within the next year. In this case, the NOL carryforward of $200,000 is the only item that is expected to be realized in Year 7. Therefore, the non-current deferred tax asset reported on Apple's December 31, Year 6 balance sheet would be $160,000, which is the sum of the deferred tax assets for the accelerated tax depreciation and the warranty expense.