Crystal Critters, Inc Assuming It Meets the Conditions to Net Assets and Liabilities

question 60

Multiple Choice

Crystal Critters, Inc., a U.S. GAAP reporter, has the deferred tax assets and liabilities presented below: $\begin{array}{|c|c|c|}\hline \text { Item } & \begin{array}{l}\text { Classification on the } \\\text { Balance Sheet of } \\\text { Related Account }\end{array} & \begin{array}{c}\text { Deferred Tax } \\\text { Associated with Item }\end{array} \\\hline \begin{array}{l}\text { Excess of warranty expense over } \\\text { warranty deductions }\end{array} & \text { Current } & \$ 74,000 \text { Asset } \\\hline \begin{array}{l}\text { Accelerated depreciation for tax } \\\text { purposes }\end{array} & \text { Noncurrent } & \$ 84,000 \text { Liability } \\\hline \text { nstallment sales receivable } & \text { Current } & \$ 44,000 \text { Liability } \\\hline \text { Contingent liability } & \text { Current } & \$ 34,000 \text { Asset } \\\hline\end{array}$

Assuming it meets the conditions to net assets and liabilities, how will the company report deferred taxes on the balance sheet?

• A) current liability: deferred tax liability $64,000; noncurrent liability: deferred tax liability $84,000
• B) noncurrent liability: deferred tax liability $20,000
• C) current asset: deferred tax asset $108,000; noncurrent liability: deferred tax liability $128,000
• D) current liability: deferred tax liability $44,000; noncurrent asset: deferred tax asset $84,000

---

Definitions:

Operating Expenses

Operating expenses encompass the costs associated with running the day-to-day operations of a business, excluding the cost of goods sold, such as rent, utilities, and payroll.

Net Profit Margin

A financial metric that shows the percentage of profit derived from revenue after all expenses are deducted.

Financial Information

Data related to the financial performance and financial position of a company, including income statements, balance sheets, and cash flow statements.

Net Profit Margin

The net profit margin is a financial ratio that shows the percentage of profit a company generates from its total revenue.