Quiz 3 - CTE and DTE Flashcards
CTE
amount of taxes payable or refundable for the current year
DTE
DTA or DTL
Total Tax Expense =
= CTE + DTE
Journal Entries
Debit CTE
Credit Current Tax Payable
Temp Taxable Difference
Debit DTE
Credit DTL
Reverse accounts when we “pay” the DTL and it becomes unfavorable creating a benefit
Temp Deductible Difference
Debit DTA
Credit DTE
reversal effects is the tax benefit
ETR
= total tax expense / pre tax book income
Measuring Temp Differences
Book basis = financial statement amt
Tax Basis =
Fix Asset (PPE) = use tax basis
Allowance for Doubtful Accounts = ALWAYS 0
Reserve accounts = ALWAYS 0
Accrued Expenses = Generally 0 unless amounts allowable are a deduction.
Accrued vacation or bonuses - within 2.5 months after year end
Recurring item - payments made within 8.5 months of year end
Workers compensation - Always 0
Assets
Book > Tax = DTL Ex: Fixed assets
If Tax > Book = DTA Ex: Organizational cost
Liabilities
Tax > Book = DTL Ex: installment sales
Book> Tax = DTA Ex: reserves, allowance for doubtful accounts
Three Step process
1) Begin Tax basis - Beg Book basis = Begin difference
2) End Tax basis - End Book basis = End difference
3) End difference - Begins difference
Always maintain signs and debit or (credit) balance of accounts
The deferred tax benefit occurs when there is a
decrease in DTL or increase in DTA
DTA’s and DTL’s are computed using the law and enacted rates as of the balance sheet date. If there’s an enacted change in rate, DTA/DTL must be adjusted. Enactment date is the date the bill becomes a law and president signs the bill
