Question

Weatherly Company reported the following results for the year ended December 31, 2019, its first year of operations: Income (per books before income taxes) $3,300,000 Taxable income 4,450,000 The disparity between book income and taxable income is attributable to a temporary difference, which will reverse in 2017. What should Weatherly record as a net deferred tax asset or liability for the year ended December 31, 2019, assuming that the enacted tax rates in effect are 35% in 2019 and 30% in 2020

Answer 1

December 31, 2019

$402,500 deferred tax asset

$345,000 deferred tax asset

$402,500 deferred tax liability

$345,000 deferred tax liability

Step-by-step explanation:

Weatherly Company

December 31, 2019

$402,500 deferred tax asset

$345,000 deferred tax asset

$402,500 deferred tax liability

$345,000 deferred tax liability

35%×$3,300,000=$1,155,000 Income

35%×4,450,000=$1,557,500 Taxable income

$1,155,000- $1,557,500= $402,500

30%×$3,300,000=$990,000 Income

30%×4,450,000=$1,335,000 Taxable income

$1,335,000- $990,000= $345,000