Question

Using a 21 percent rate:Compute the deferred tax asset or deferred tax liability (if any) from a transaction resulting in a $31,000 temporary excess of book income over taxable income.Compute the deferred tax asset or deferred tax liability (if any) from a transaction resulting in an $18,400 permanent excess of book income over taxable income.Compute the deferred tax asset or deferred tax liability (if any) from a transaction resulting in a $55,000 temporary excess of taxable income over book income.

Answer 1

A) 21% of $31,000 excess of book income over taxable income = $6,510 deferred tax liability.

B) There is no deferred tax asset or liability from permanent book/tax difference.

C) Deferred tax asset or deferred tax liability from a transaction resulting in a $55,000 temporary excess of taxable income over book income: 21% of $55,000 excess of taxable income over book income = $11,550 deferred tax asset.