Question

In its 20X5 income statement, Tow, Inc. reports proceeds from an officer's life-insurance policy of $90,000 and depreciation of $250,000. Tow was the owner and beneficiary of the life insurance on its officer. Tow deducted depreciation of $370,000 in its 20X5 income tax return when the tax rate was 30%. Data related to the reversal of the excess tax deduction for depreciation follow: Year Reversal of excess tax deduction Enacted tax rates 20X6 $50,000 35% 20X7 $40,000 35% 20X8 $20,000 25% 20X9 $10,000 25% There are no other temporary differences. In its December 31, 20X5 balance sheet, what amount should Tow report as a deferred income tax liability

Answer 1

the deferred income tax liability is $25,200

Step-by-step explanation:

The computation of the deferred income tax liability is given below:

= Excess of depreciation as per tax over books × Tax rate

= ($370,000 - $250,000) × 21%

= $25,200

Hence, the deferred income tax liability is $25,200

We simply applied the above formula so that the correct value could come

And, the same would be considered