Question

UML Foods reported $940 million in income before income taxes for 2020, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $120 million. The company also had non-tax-deductible expenses of $80 million relating to permanent differences. The income tax rate for 2020 was 35%, but the enacted rate for years after 2020 is 30%. The balance in the deferred tax liability in the December 31, 2020, balance sheet is:

Answer 1

$36,000,000

Step-by-step explanation:

Note: Permanent differences have no impact on deferred taxes.

Deferred tax liability = $120 million * 30%

Deferred tax liability = $120 million * 0.30

Deferred tax liability = $36,000,000

So, the balance in the deferred tax liability in the December 31, 2020, balance sheet is $36,000,000.