Question

iberty corp. receives rent in advance of $100,000 in year 1. the timing difference is expected to reverse $40,000 in year 2 and $60,000 in year 3. the enacted tax rates are 20% in year 1, 25% in year 2, and 30% in year 3. what is the amount in the deferred tax asset account at december 31, year 1? multiple choice question. $30,000 $20,000 $8,000 $28,000 $25,000

Answer 1

The amount in the deferred tax asset account at December 31, Year 1 is $28,000.

Step-by-step explanation:

The amount in the deferred tax asset account at December 31, Year 1 can be calculated by multiplying the timing differences in Year 2 and Year 3 by their respective enacted tax rates and then summing them up. In this case, the timing differences are $40,000 in Year 2 and $60,000 in Year 3, and the enacted tax rates are 25% and 30% respectively. So, the amount in the deferred tax asset account is:

($40,000 * 0.25) + ($60,000 * 0.30) = $10,000 + $18,000 = $28,000

Therefore, the correct answer is $28,000.