Question

Differences between pretax accounting income and taxable income were as follows during 2021: ($ in millions) Pretax accounting income $ 400 Permanent difference (34 ) 366 Temporary difference (26 ) Taxable income $ 340 The cumulative temporary difference as of the end of 2021 is $80 million (also the future taxable amount). The enacted tax rate is 25%. What is the deferred tax asset or liability to be reported in the balance sheet

Answer 1

20 million

Step-by-step explanation:

Calculation to determine the deferred tax asset or liability to be reported in the balance sheet

Using this formula

Deferred tax asset or liability=cumulative temporary difference as of the end of 2021 *tax rate

Let plug in the formula

Deferred tax asset or liability= $80 million *25%

Deferred tax asset or liability=20 million

Therefore the deferred tax asset or liability to be reported in the balance sheet is $20 million