Question

Giada Foods reported $1,010 million in income before income taxes for 2021, its first year of operations. Tax depreciation exceeds depreciation for financial reporting purposes by $170 million. The company also had non-tax-deductible expenses of $108 million relating to permanent differences. The income tax rate for 2021 was 25%, but the enacted rate for years after 2021 is 30%. The balance in the deferred tax liability in the December 31, 2021, balance sheet is:

Answer 1

$32.4 million

Step-by-step explanation:

The computation of the balance in the deferred tax liability in the December 31, 2021, balance sheet is shown below:

Deferred tax liability is

= Tax depreciation exceeded depreciation for financial reporting purposes × enacted tax rate

= $108 million × 30%

= $32.4 million

Simply we multiplied the exceeded amount with the enacted rate so that the deferred tax liability could come