Question

Larsen Corporation reported $200,000 in revenues in its 2018 financial statements, of which $66,000 will not be included in the tax return until 2019. The enacted tax rate is 40% for 2018 and 35% for 2019. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2018

Answer 1

The deferred income tax liability is $23,100.00

Step-by-step explanation:

The deferred income tax liability in Larsen corporation balance sheet as at

31st December 2018 is the deferred revenues multiplied by the tax rate in the year the deferred would be assessed to tax .

In this case the deferred revenue is $66,000 which would reported in 2019 tax year when tax rate would be 35%,hence the deferred income tax liability can be calculated as follows:

deferred income tax liability=$66,000*35%

=$23,100.00