Question

Swordfish Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000. Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Swordfish's deferred income tax expense or benefit would be:

Answer 1

net deferred tax benefit 42.500

Step-by-step explanation:

increase in warranty reserve 25.000

excess book depreciation 100.000

total 125.000

x tax rate 0.34

net deferred tax benefit 42.500

*The reported pretax book income of $1,000,000 is not considered