Question

Loran's pretax accounting income in 20X1 is $100,000. Loran had bad debt expense for financial reporting purposes of $14,000 in 20X1. In 20X1, Loran deducted $4,000 in bad debts. Loran expects the timing difference to reverse $3,000 in 20X2 and $7,000 in 20X3. The income tax rate is 40%. Which of the following entries would be included for the deferred tax entry required at the end of 20X2?

Answer 1

The answer is "2800".

Step-by-step explanation:

The positive temporary difference at 20X2 end
`= 7000`

X Tax rate on revenue
`=40\%`

At the end of 20X2 deferred account of tax assets=
`2800`