Question

Giada Foods reported $910 million in income before income taxes for 2018, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $85 million. The company also had non-tax-deductible expenses of $68 million relating to permanent differences. The income tax rate for 2018 was 35%, but the enacted rate for years after 2018 is 40%. The balance in the deferred tax liability in the December 31, 2018, balance sheet is:A. $35 million.B. $16 million.C. $40 million.D. $56 million.

Answer 1

A. $35 million

Step-by-step explanation:

Deferred tax liability balance = $85 million*40%

= $35 million

Permanent differences have no effect on deferred taxes liability.