Question

A reconciliation of Zack's Company's pretax accounting income with its taxable income for 2018, its first year of operations, is as follows: Pretax accounting income $3,000,000 Excess tax depreciation (150,000) Taxable income $2,850,000 The excess tax depreciation will result in equal net taxable amounts in each of the next three years. Enacted tax rates are 40% in 2018, 35% in 2019 and 2020, and 30% in 2021. The total deferred tax liability to be reported on Charles's balance sheet at December 31, 2018, is

Answer 1

the total deferred tax liability is $50,000

Step-by-step explanation:

The computation of the total deferred tax liability is shown below:

Tax Depreciation 2019 $17500 {[$150000 ÷ 3] × 35%}

Tax Depreciation 2020 $17500 {[$150000 ÷ 3] × 35%}

Tax Depreciation 2021 $15000 {[$150000 ÷ 3] × 30%}

Total Deferred Tax Liability $50,000

Hence, the total deferred tax liability is $50,000