Question

If a $150,000 balance in Deferred Tax Liability was computed by use of a 30% rate, the underlying cumulative temporary difference amounts to

Answer 1

$105,000

Step-by-step explanation:

Given:

Balance in deferred tax liabilities = $150,000

Rate of computing deferred tax liabilities = 30% =
`(30)/(100)` = 0.30

Cumulative temporary difference = ?

Computation of Cumulative temporary difference:

Temporary difference = Balance in deferred tax liabilities - (Balance in deferred tax liabilities × Tax rate)

= $150,000 - ($150,000 × 0.30)

= $150,000 - $45,000

= 105,000