Question

Shwonson Industries reported a deferred tax asset of 5 million for the year ended December 31, 2023, related to a temporary difference of 20 million. What is the deferred tax asset as a percentage of the temporary difference?

1) 25%
2) 50%
3) 75%
4) 100%

Answer 1

The deferred tax asset is 25% of the temporary difference, calculated by dividing the deferred tax asset (5 million) by the temporary difference (20 million) and then multiplying by 100%.

Step-by-step explanation:

The student's question relates to the calculation of a deferred tax asset as a percentage of a temporary difference. To find this percentage, you divide the deferred tax asset by the temporary difference and then multiply the result by 100%. In this case, Shwonson Industries reported a deferred tax asset of 5 million and a temporary difference of 20 million. Therefore, the percentage is calculated as (5 million / 20 million) × 100% = 25%. This means that the deferred tax asset is 25% of the temporary difference.