Question

The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis by $147,000 at December 31, 2021. This was a result of differences between straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The asset was acquired earlier in the year. Boze has no other temporary differences. The enacted tax rate is 27% for 2021 and 40% thereafter. Boze should report the deferred tax effect of this difference in its December 31, 2021, balance sheet as:

Answer 1

Boze should report the deferred tax effect of this difference in its December 31, 2021, balance sheet as a liability of $58,800

Step-by-step explanation:

According to the given data Boze Music's only depreciable asset exceeded its tax basis by $147,000 and there is a rate of 40% thereafter.

Therefore, in order to calculate what amount Boze should report the deferred tax effect of this difference in its December 31, 2021, balance sheet, we would have to make the following calculation:

deferred tax liabilty= $147,000×40%

deferred tax liabilty=$58,800

Boze should report the deferred tax effect of this difference in its December 31, 2021, balance sheet as a liability of $58,800