Jogg, Inc., earns book net income before tax of $600,000. It puts into service a depreciable asset this year, and its first-year tax depreciation exceeds book depreciation by $120,000. Jogg has recorded no other temporary or permanent book tax differences. Assuming that the U. S. tax rate is 21%, and that this is Jogg's first year of operations, what is Jogg's balance in its deferred tax asset and deferred tax liability accounts at year-end?

Question

Walter Whitney

Business

1 March, 06:41

Jogg, Inc., earns book net income before tax of $600,000. It puts into service a depreciable asset this year, and its first-year tax depreciation exceeds book depreciation by $120,000. Jogg has recorded no other temporary or permanent book tax differences. Assuming that the U. S. tax rate is 21%, and that this is Jogg's first year of operations, what is Jogg's balance in its deferred tax asset and deferred tax liability accounts at year-end?

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Valerie Guerrero · Answer 1

Deferred Tax Asset = $0

Deferred Tax Liability = $25,200

Explanation:

There is no advance Tax payment held by Jogg. Inc. so their Deferred Tax Asset is equal to Zero.

Deferred Tax Liability, represents the amount of tax that will pay by the firm in the future.

Given:

Tax Deprecation Exceeds = $120,000

U. S. tax rate = 21%

Computation of Deferred Tax Liability:

Tax Deprecation Exceeds x U. S. tax rate

$120,000 x 21%

$25200