Question

rocky corp. receives rent in advance of $100,000 in year 1. the timing difference is expected to reverse $30,000 in year 2 and $70,000 in year 3. the enacted tax rates are 30% in year 1 and year 2, and 40% in year 3. what is the amount in the deferred tax asset account at december 31, year 1? multiple choice question. $28,000 $30,000 $37,000 $21,000

Answer 1

The amount in the deferred tax asset account at December 31, Year 1 for Rocky Corp. is $37,000, calculated by adding the tax effects of the timing differences for Year 2 and Year 3.

Step-by-step explanation:

To calculate the amount in the deferred tax asset account at December 31, Year 1 for Rocky Corp., we need to consider the rent received in advance and the timing difference in relation to the enacted tax rates. The company receives $100,000 in Year 1, which will be taxed in future years as it is earned. The timing differences are $30,000 reversing in Year 2 and $70,000 in Year 3. Since the tax rate is 30% in Year 1 and 2, and 40% in Year 3, the deferred tax asset can be calculated as follows:

• Deferral in Year 2: $30,000 x 30% = $9,000
• Deferral in Year 3: $70,000 x 40% = $28,000

The total deferred tax asset at the end of Year 1 is the sum of these two amounts: $9,000 (Year 2) + $28,000 (Year 3) = $37,000.