Question

Sunland, Inc. had pre-tax accounting income of $2100000 and a tax

rate of 40% in 2018, its first year of operations. During 2018 the company had the following transactions:

Received rent from Jane, Co. for 2019 $90000
Municipal bond income $114000
Depreciation for tax purposes in excess of book depreciation $54000
Installment sales profit to be taxed in 2019 $156000
At the end of 2018, which of the following deferred tax accounts and balances exist at December 31, 2018?
a. Deferred tax asset $57600
b. Deferred tax asset $36000
c. Deferred tax liability $57600
d. Deferred tax liability $36000

Answer 1

b. Deferred tax asset $36000

Step-by-step explanation:

The computation of the deferred tax is shown below:

= Rent received from Jane for the year 2019 × tax rate in 2018

= $90,000 × 40%

= $36,000

Here the rent received on 2019 but the tax should be paid on 2018 so this represent the deferred tax asset

Therefore the option b is correct