blueberry028
Newbie
Joined: 18 May 2016
Location: United States
Online Status: Offline
Posts: 5
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| Posted: 18 May 2016 at 22:16 | IP Logged
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Erika?s Surf Shop had taxable income in Year 2 of
$500,000 and pretax financial income of $600,000. The
company had a cumulative $200,000 difference between
its taxable income and pretax financial statement
income at December 31, Year 1. These differences were
solely related to accelerated depreciation methods
used for income tax purposes. The enacted tax rate
increased to 30 percent in Year 2 compared to an
enacted rate of 20 percent in the prior year. At
December 31, Year 2, the company would record a
deferred tax expense of: (Points: 10)
a)$40,000
b)$50,000
c)$90,000
d)$150,000
The answer is $50,000
$200,000 x (30% - 20%) = $20,000 deferred tax expense
to be recorded in year 2 for year 1 due to increased
tax rate
+ (600,000 - 500,000) x 30% = $30,000 deferred tax
expense for year 2
= $50,000 total deferred tax expense for year 2
I don't get why we need take off the " net of the
previously recorded deferred tax liability--50，000 "
from
accumulated DTL?
thanks
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Topic: deferred tax liability
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